Le rapport 2013 du WEF sur les risques dans le monde
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Le rapport 2013 du WEF sur les risques dans le monde Document Transcript

  • 1. Insight ReportGlobal Risks 2013Eighth EditionAn Initiative of the Risk Response Network
  • 2. The information in this report, or on which this reportis based, has been obtained from sources that theauthors believe to be reliable and accurate. However,it has not been independently verified and norepresentation or warranty, express or implied, is madeas to the accuracy or completeness of any informationobtained from third parties. In addition, the statementsin this report may provide current expectations of futureevents based on certain assumptions and include anystatement that does not directly relate to a historical factor a current fact. These statements involve known andunknown risks, uncertainties and other factors whichare not exhaustive. The companies contributing to thisreport operate in a continually changing environmentand new risks emerge continually. Readers arecautioned not to place undue reliance on thesestatements. The companies contributing to this reportundertake no obligation to publicly revise or updateany statements, whether as a result of new information,future events or otherwise and they shall in no event beliable for any loss or damage arising in connection withthe use of the information in this report.© 2013 World Economic ForumAll rights reserved.No part of this publication may be reproduced ortransmitted in any form or by any means, includingphotocopying and recording, or by any informationstorage and retrieval system.ISBN: 92-95044-50-9978-92-95044-50-0REF: 301211World Economic Forum91-93 route de la CapiteCH-1223 Cologny/GenevaSwitzerlandTel.: +41 (0) 22 869 1212Fax: +41 (0) 22 786 2744contact@weforum.orgwww.weforum.org2 Global Risks 2013
  • 3. Global Risks 2013Eighth EditionAn Initiative of the Risk Response NetworkLee HowellWorld Economic ForumEditor in ChiefWorld Economic Forum in collaboration with:Marsh & McLennan CompaniesNational University of SingaporeOxford Martin School, University of OxfordSwiss Reinsurance CompanyWharton Center for Risk Management, University of PennsylvaniaZurich Insurance Group Global Risks 2013 3
  • 4. Figure 1: Global Risks Landscape 2013 versus 2012i Economic Environmental Major systemic financial failure 4 Chronic fiscal imbalances 4 Extreme volatility in energy and agriculture prices Failure of climate change adaptation Rising greenhouse Severe income Persistent gas emissions Recurring liquidity crises disparity extreme Unmanageable Irremediable pollution weather inflation or deflation Chronic labour market imbalances Land and waterway 3.5 3.5 use mismanagement Antibiotic-resistant Hard landing of an bacteria emerging economy Unprecedented Mismanaged urbanization geophysical Prolonged infrastructure neglect destruction Species overexploitation Impact if the risk were to occur Impact if the risk were to occur Vulnerability to geomagnetic storms 3 3 Unforeseen negative consequences of regulation 2.5 2.5 2.5 3 3.5 4 2.5 3 3.5 4 Likelihood to occur in the next ten years Likelihood to occur in the next ten years Geopolitical Societal Water supply crises 4 4 Diffusion of weapons of mass destruction Food shortage crises Global governance failure Unsustainable population growth Rising religious fanaticism Failure of diplomatic Terrorism conflict resolution Mismanagement of 3.5 3.5 Vulnerability to pandemics population ageing Critical fragile states Pervasive entrenched corruption Unmanaged migration Unilateral resource nationalization Backlash against globalization Rising rates of chronic disease Entrenched organized crime Impact if the risk were to occur Impact if the risk were to occur Militarization Widespread illicit trade 3 of space 3 Ineffective illicit drug policies 2.5 2.5 2.5 3 3.5 4 2.5 3 3.5 4 Likelihood to occur in the next ten years Likelihood to occur in the next ten years Technological 4 Critical systems failure 3.5 Mineral resource supply vulnerability Cyber attacks Unforeseen consequences of new life science Massive incident of technologies data fraud/theft Massive digital misinformation Impact if the risk were to occur Unforeseen consequences of climate change mitigation 3 Unforeseen consequences Failure of intellectual property regime of nano- technology Proliferation of orbital debris 2.5 2.5 3 3.5 4 Likelihood to occur in the next ten yearsSource: World Economic Forumi NB: Some of the movements are due to changes in the composition of the sample. For more detail please see Section 4 Survey Findings.4 Global Risks 2013
  • 5. Figure 2: Global Risks Landscape 2013 4.2 4.1 Major systemic financial failure 4 Water supply crises Chronic fiscal imbalances Failure of climate change adaptation Diffusion of weapons of mass destruction 3.9 Extreme volatility in energy and agriculture prices Rising greenhouse gas emissions Food shortage crises 3.8 Severe income disparity Global governance failure Chronic labour market imbalances 3.7 Unsustainable population growth Failure of diplomatic conflict resolution Mismanagement of population ageing Irremediable pollution Recurring Rising liquidity religious Critical systems failure crises fanaticism Persistent extreme weather 3.6 Vulnerability Terrorism Unmanageable inflation or deflation to pandemics Antibiotic- resistant Critical fragile states bacteria Land and waterway use mismanagement Cyber attacks 3.5 Hard landing of an emerging economy Pervasive entrenched corruption Unilateral resource nationalization Mineral resource supply vulnerability 3.4 Unforeseen consequences of new life science technologies Unmanaged migration Mismanaged urbanization Unforeseen Rising rates of Species overexploitation Backlash against globalization consequences chronic disease 3.3 Unprecedented geophysical destruction of climate change mitigation Massive incident of data fraud/theft Massive digital misinformation 3.2 Entrenched organized crime Unforeseen negative Prolonged Vulnerability to Militarization of space consequences infrastructure geomagnetic of regulation neglect 3.1 storms Ineffective illicit drug policies Widespread illicit trade 3 Unforeseen consequences Failure of intellectual property regime of nanotechnologyImpact if the risk were to occur 2.9 2.8 Proliferation of orbital debris 5 Economic 4 2.7 Environmental 3 Geopolitical 2 Societal 2.6 1 1 2 3 4 5 Technological 2.5 2.5 2.6 2.7 2.8 2.9 3 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 4 4.1 4.2 Likelihood to occur in the next ten years Source: World Economic Forum Global Risks 2013 5
  • 6. Figure 3: Global Risks Map 2013ii Vulnerability to geomagnetic storms Critical systems failure Militarization of space Prolonged infrastructure Proliferation of orbital debris neglect Digital Wildfires in a Cyber attacks Hyperconnected World Massive digital misinformation Diffusion of weapons of mass destruction Massive incident of data fraud/theft Terrorism Rising religious fanaticism Failure of diplomatic conflict resolution Unilateral resource nationalization Major systemic financial failure Widespread Entrenched organized crime illicit trade Hard landing of an emerging economy Failure of climate change adaptation Global governance Mineral resource Ineffective Unforeseen negative failure Land and waterway use supply vulnerability illicit drug consequences of regulation Failure of intellectual mismanagement policies property regime Pervasive entrenched corruption Extreme volatility in energy and agriculture prices Food shortage crises Backlash against globalization Water supply crises Severe income disparity Species overexploitation Persistent Unprecedented extreme geophysical weather destruction Chronic labour market imbalances Mismanaged Unsustainable population growth urbanization Rising greenhouse gas emissions Chronic fiscal Unmanaged migration Recurring liquidity crises imbalances Unforeseen consequences Irremediable pollution of climate change mitigation Mismanagement of population aging Rising rates of Testing Economic and chronic disease Antibiotic Unmanageable inflation or deflation Environmental Resilience resistant Unforeseen consequences of new life science technologies bacteria Vulnerability to pandemics The Dangers of Hubris Unforeseen consequences of nanotechnology on Human HealthSource: World Economic Forumii Please see figure 37 in Survey Findings for the complete global risks interconnection map.6 Global Risks 2013
  • 7. ContentsSection 18 Preface9 Foreword10 Executive Summary 13 Box 1: The Evolving Risk Landscape14 IntroductionSection 216 Testing Economic and Environmental Resilience21 Box 2: The Green Growth Action Alliance (G2A2)23 Digital Wildfires in a Hyperconnected World27 Box 3: Hyperconnected World28 The Dangers of Hubris on Human Health34 Box 4: Bringing Space Down to EarthSection 336 Special Report: Building National Resilience to Global Risks42 Box 5: Supply Chain Risk Initiative43 Box 6: Resilience Practices Exchange (RPE)43 Box 7: One Year On Resilience PracticesSection 445 Survey Findings53 Box 8: The Global Risks 2013 Data ExplorerSection 555 X Factors60 ConclusionSection 661 Appendix 1 - The Survey62 Appendix 2 - Likelihood and Impact66 Appendix 3 - Resilience74 Acknowledgements78 Project Team Global Risks 2013 7
  • 8. Section 1 Preface Resilient Dynamism is the theme for this year’s World Economic Forum Annual Meeting in Davos-Klosters, and I am pleased to introduce the Global Risks 2013 report in the same spirit. Based on an extensive survey of over 1,000 experts worldwide, the report – now in its eighthSection 2 edition – serves to orient and inform decision-makers as they seek to make sense of an increasingly complex and fast-changing world. I hope this report challenges, provokes and inspires you, and I invite you to engage – if you have not already done so – with the World Economic Forum’s Risk Response Network, which provides private and public sector leaders with a collaborativeSection 3 platform to build national resilience to global risks. As we strive to restore confidence and growth globally, leaders cannot continue with a “risk-off” mindset if our collective goal remains to seize transformational opportunities that can improve the state of the world. Dynamism in our hyperconnected world requiresSection 4 increasing our resilience to the many Klaus Schwab Founder and Executive Chairman global risks that loom before us. World Economic Forum By their nature, global risks do not respect national borders, as highlighted in this report. And we now know that extreme weather events exacerbated by climate change will not limit their effects to countries that are major greenhouse gas emitters; false information posted on social networks can spread like wildfire toSection 5 the other side of the globe in a matter of milliseconds; and genes that make bacteria resistant to our strongest antibiotics can hitch a ride with patients on an intercontinental flight. I, therefore, invite you to read the case studies in this report of the three examples cited above to understand better the international andSection 6 interdependent nature of such constellations of risks. I think you will agree that each one makes a compelling case for stronger cross-border collaboration among stakeholders from governments, business and civil society – a partnership with the purpose of building resilience to global risks. They also highlight the need for strengthening existing mechanisms to mitigate and manage risks, which today primarily exist at the national level. This means that while we can map and describe global risks, we cannot predict when and how they will manifest; therefore, building national resilience to global risks is of paramount importance. 8 Global Risks 2013
  • 9. Section 1Foreword Per the revamped methodology intro- duced in 2012, the 2013 report presents three in-depth “risk cases” exploring themes based on analysis of survey data, as well as detailed follow-up expert interviews and partner workshops. This eighth edition increased its geographic Section 2 breadth and disciplinary depth by bringing on two new report partners from academia: the National University of Singapore (NUS) and the Oxford Martin School at the University of Oxford. We also entered into an exciting editorial partnership with Nature, a leading science journal, to push the boundaries of the imagination further with a re- vamped “X Factors” section of the report. Section 3 We have introduced unique content and data online, including an interactive Resilience is the theme that runs through website through which you can explore the eighth edition of this report. It seems an the risks landscape and a one-year-on obvious one when contemplating the follow-up of the three risk cases external nature of global risks because they presented in the 2012 report from a are beyond any organization’s or nation’s perspective of how to promote resilience. capacity to manage or mitigate on their own. And yet global risks are often Our Special Report this year takes the first steps towards developing a national Section 4 diminished, or even ignored, in current enterprise risk management. One reason resilience measurement with regard to for this is that global risks do not fit neatly global risks. It explores the use of qualitative into existing conceptual frameworks. and quantitative indicators to assess overall Fortunately, this is changing. The Harvard national resilience to global risks by looking Business Review recently published a at five national-level subsystems concise and practical taxonomy that may (economic, environmental, governance, also be used to consider global risks.1 infrastructure and social) through the lens There are three types of risks as catego- of five components: robustness, rized by Professors Kaplan and Mikes. redundancy, resourcefulness, response and recovery. The aim is to develop a new Section 5 First are “preventable” risks, such as diagnostic report to enable decision- breakdowns in processes and mistakes by makers to track progress in building employees. Second are “strategic” risks, national resilience and possibly identify which a company undertakes voluntarily, where further investments are needed. The having weighed them against the potential interim study will be published this summer. rewards. Third are “external” risks, which this report calls “global risks”; they are Linked to this research effort is the launch complex and go beyond a company’s of an online “Resilience Practices scope to manage and mitigate (i.e. they are Exchange”, where leaders can learn and exogenous in nature). This differentiation contribute to building resilience using the Section 6 will, we hope, not only improve strategic latest social enterprise technology. These planning and decision-making but also new efforts will enable the World Economic increase the utility of our report in private Forum’s Risk Response Network (RRN) to and public sector institutions. become the foremost international platform to enable leaders to map, mitigate, monitor The concept of resilience also influenced and enhance resilience to global risks. this year’s Global Risks Perception Therefore, I invite you to get in touch with Survey, on which this report is built. The the RRN and share your ideas and annual survey of experts worldwide initiatives to assess and to improve national added a new question asking respond- resilience to global risks. ents to rate their country’s resilience – or, precisely, its ability to adapt and recover – in the face of each of the 50 risks covered in the survey. More than 1,000 experts responded to our survey, making the dataset explored in this report more textured and robust than ever. Lee Howell Managing Director Risk Response Network 1 Kaplan, R.S., and Mikes, A. Managing Risks: A New Framework. In Harvard Business Review, 2012. Global Risks 2013 9
  • 10. Section 1 Executive SummarySection 2 The World Economic Forum’s Global Risks The global risk that respondents rated most likely to manifestSection 3 over the next 10 years is severe income disparity, while the risk 2013 report is developed from an annual rated as having the highest impact if it were to manifest is major survey of over 1,000 experts from industry, systemic financial failure. There are also two risks appearing in the top five of both impact and likelihood – chronic fiscal government, academia and civil society who imbalances and water supply crisis (see Figure 4). were asked to review a landscape of 50 Figure 4: Top Five Risks by Likelihood and Impact global risks. LikelihoodSection 4 Very Unlikely Almost Certain Severe income disparity 4.14 Chronic fiscal imbalances 3.99 Rising greenhouse gas emissions 3.91 Water supply crises 3.85 Mismanagement of population ageing 3.83Section 5 1 2 3 4 5 Average Likelihood Impact Low Impact High Impact Major systemic financial failure 4.05 Water supply crises 3.99 Chronic fiscal imbalances 3.97Section 6 Food shortage crises 3.95 Diffusion of weapons of mass destruction 3.92 1 2 3 4 5 Average Impact Source: World Economic Forum Unforeseen consequences of life science technologies was the biggest mover among global risks when assessing likelihood, while unforeseen negative consequences of regulation moved the most on the impact scale when comparing the result with last year’s (see Figure 5). 10 Global Risks 2013
  • 11. Section 1Figure 5: Top Five Changes by Likelihood and Impact Digital Wildfires in a Hyperconnected World In 1938, thousands of Americans confused a radio adaptation ofBy Likelihood the H.G. Wells novel The War of the Worlds with an official news Very Unlikely Almost Certain broadcast and panicked, in the belief that the United States had Unforeseen consequences 2013 3.11 [44th] been invaded by Martians. Is it possible that the Internet could of new life science technologies 2012 2.68 [49th] be the source of a comparable wave of panic, but with severe Unforeseen consequences Section 2 3.23 [38th] of climate change mitigation 2.80 [46th] geopolitical consequences? Social media allows information to 3.45 [23rd] spread around the world at breakneck speed in an open system Unsustainable population growth 3.05 [38th] where norms and rules are starting to emerge but have not yet 3.46 [21st] been defined. While the benefits of our hyperconnected Hard landing of an emerging economy 3.07 [37th] communication systems are undisputed, they could potentially 3.83 [5th] enable the viral spread of information that is either intentionally or Mismanagement of population ageing 3.44 [18th] unintentionally misleading or provocative. Imagine a real-world 1 2 3 4 5 example of shouting “fire!” in a crowded theatre. In a virtual Average Likelihood Score [Rank] equivalent, damage can be done by rapid spread of misinformation even when correct information follows quickly. Are there ways for generators and consumers of social media to Section 3By Impact develop an ethos of responsibility and healthy scepticism to Low Impact High Impact mitigate the risk of digital wildfires? Unforeseen negative 2013 3.18 [43rd] The Dangers of Hubris on Human Health consequences of regulation 2012 2.77 [48th] 3.40 [30th] Health is a critical system that is constantly being challenged, be Unilateral resource nationalization 3.02 [43rd] it by emerging pandemics or chronic illnesses. Scientific 3.73 [11th] discoveries and emerging technologies allow us to face such Chronic labour market imbalances 3.38 [27th] challenges, but the medical successes of the past century may Hard landing of an emerging economy 3.49 [27th] also be creating a false sense of security. Arguably, one of the Section 4 3.15 [36th] most effective and common means to protect human life – the Mismanagement of population ageing 3.66 [14th] use of antibacterial and antimicrobial compounds (antibiotics) 3.36 [28th] – may no longer be readily available in the near future. Every dose 1 2 3 4 5 of antibiotics creates selective evolutionary pressures, as some Average Impact Score [Rank] bacteria survive to pass on the genetic mutations that enabledSource: World Economic Forum them to do so. Until now, new antibiotics have been developed to replace older, increasingly ineffective ones. However, human innovation may no longer be outpacing bacterial mutation. NoneThree Risk Cases of the new drugs currently in the development pipeline may be effective against certain new mutations of killer bacteria thatThe report introduces three risk cases, based on an analysis of could turn into a pandemic. Are there ways to stimulate the Section 5survey results, consultation with experts and further research. development of new antibiotics as well as align incentives toEach case represents an interesting constellation of global risks prevent their overuse, or are we in danger of returning to aand explores their impact at the global and national levels. The pre-antibiotic era in which a scratch could be potentially fatal?three risk cases are: Special Report: National Resilience toTesting Economic and Environmental Resilience Global RisksContinued stress on the global economic system is positionedto absorb the attention of leaders for the foreseeable future.Meanwhile, the Earth’s environmental system is simultaneously This year’s Special Report examines the difficult issue of how a Section 6coming under increasing stress. Future simultaneous shocks to country should prepare for a global risk that is seemingly beyondboth systems could trigger the “perfect global storm”, with its control or influence. One possible approach rests withpotentially insurmountable consequences. On the economic “systems thinking” and applying the concept of resilience tofront, global resilience is being tested by bold monetary and countries. The report introduces five components of resilienceaustere fiscal policies. On the environmental front, the Earth’s – robustness, redundancy, resourcefulness, response andresilience is being tested by rising global temperatures and recovery – that can be applied to five country subsystems: theextreme weather events that are likely to become more frequent economic, environmental, governance, infrastructure and social.and severe. A sudden and massive collapse on one front is The result is a diagnostic tool for decision-makers to assess andcertain to doom the other’s chance of developing an effective, monitor national resilience to global risks.long-term solution. Given the likelihood of future financial crisesand natural catastrophes, are there ways to build resilience inour economic and environmental systems at the same time? Global Risks 2013 11
  • 12. Section 1 X Factors from Nature Developed in partnership with the editors of Nature, a leading science journal, the chapter on “X Factors” looks beyond the landscape of 50 global risks to alert decision-makers to five emerging game-changers:Section 2 -- Runaway climate change: Is it possible that we have already passed a point of no return and that Earth’s atmosphere is tipping rapidly into an inhospitable state? -- Significant cognitive enhancement: Ethical dilemmas akin to doping in sports could start to extend into daily working life; an arms race in the neural “enhancement” of combat troops could also ensue. -- Rogue deployment of geoengineering: Technology is now being developed to manipulate the climate; a state or private individual could use it unilaterally.Section 3 -- Costs of living longer: Medical advances are prolonging life, but long-term palliative care is expensive. Covering the costs associated with old age could be a struggle. -- Discovery of alien life: Proof of life’s existence elsewhere in the universe could have profound psychological implications for human belief systems. The Global Risks report is the flagship research publication of the World Economic Forum’s Risk Response Network, whichSection 4 provides an independent platform for stakeholders to explore ways to collaborate on building resilience to global risks. Further information can be found at www.weforum.org/risk.Section 5Section 6 12 Global Risks 2013
  • 13. Section 1Box 1: The Evolving Risk LandscapeHow do the top risks as identified by the annual Global Risks Perception Survey change over time? Figure 6 shows how this listchanged over the past seven years. The average ratings of the risks have changed slightly, as described in detail in Section 4 of thereport, but the relative ranking of the risks according to their impact or their likelihood is less affected. Interestingly, the diffusion ofweapons of mass destruction has moved into the top five risks in terms of impact.iii Section 2Figure 6: Top Five Global Risks in Terms of Impact and Likelihood, 2007-2013Top 5 Global Risks in Terms of Likelihood 2007 2008 2009 2010 2011 2012* 2013* Breakdown of Asset price collapse Asset price collapse Asset price collapse Meteorological Severe income Severe income1st critical information catastrophes disparity disparity infrastructure Breakdown of critical information infrastructure Section 3 Chronic disease Middle East Slowing Chinese Slowing Chinese Hydrological Chronic fiscal Chronic fiscal2nd in developed instability economy (<6%) economy (<6%) catastrophes imbalances imbalances countries Oil price shock Failed and failing Chronic disease Chronic disease Corruption Rising greenhouse Rising greenhouse3rd states gas emissions gas emissions Breakdown of critical information China economic Oil and gas price Global governance Fiscal crises infrastructure Biodiversity loss Cyber attacks Water supply crises4th hard landing spike gaps Section 4 Asset price collapse Chronic disease, Retrenchment Global governance Climatological Water supply crises Mismanagement5th developed world from globalization gaps catastrophes of population (emerging) ageingTop 5 Global Risks in Terms of Impact 2007 2008 2009 2010 2011 2012* 2013* Asset price collapse Asset price collapse Asset price collapse Asset price collapse Fiscal crises Major systemic Major systemic Section 51st financial failure financial failure Breakdown of critical information infrastructure Retrenchment Retrenchment Retrenchment Retrenchment Climatological Water supply Water supply2nd from globalization from globalization from globalization from globalization catastrophes crises crises (developed) (developed) (developed) Interstate and Slowing Chinese Oil and gas Oil price spikes Geopolitical Food shortage Chronic fiscal3rd civil wars economy (<6%) price spike conflict crises imbalances Breakdown of critical information Pandemics Oil and gas Chronic disease Chronic disease infrastructure Asset price collapse Chronic fiscal Food shortage Section 64th price spike imbalances crises Oil price shock Pandemics Fiscal crises Fiscal crises Extreme energy Extreme volativity Diffusion of5th price volativity in energy and weapons of mass agriculture prices destruction Economic Environmental Geopolitical Societal TechnologicalSource: World Economic Forumiii *The survey methodology changed significantly after the 2011 report. In contrast to the years 2007 to 2011, the list of 50 risks that was assessed by the survey did not change in 2012 and 2013. Global Risks 2013 13
  • 14. Section 1 IntroductionSection 2 The nature of global risks is constantly The World Economic Forum is now in its eighth year ofSection 3 publishing the Global Risks report. The purpose of the current changing. Thirty years ago, chlorofluorocar- edition is twofold. First, it aims to show how experts from around bons (CFCs) were seen as a planetary risk, the world, from different backgrounds, currently perceive the risks that the world is likely to face over the next decade. To while threat from a massive cyber attack capture these opinions, a survey was carried out, interviews were conducted with specialists in different fields, and a series was treated by many as science fiction. In of workshops and conference sessions were held with expert the same period, the proliferation of nuclear groups to interpret the research findings and to work out the three risk cases developed in the report. Second, with this weapons occupied the minds of scientists report the World Economic Forum aims to continue to raiseSection 4 and politicians, while the proliferation of awareness about global risks, to stimulate thinking about how risks can be factored into strategy development, and to orbital debris did not. We see a similar story challenge global leaders to improve how they approach global with asbestos then and carbon nanotubes risks. today, and the list goes on. Annual Survey – Assessing Global Risks With new information, the perceptions and The Global Risks Perception Survey was conducted in realities of risks change, and often in September 2012. Over 1,000 experts responded to evaluate 50Section 5 global risks from five categories – economic, environmental, unforeseen directions. Consider that in geopolitical, societal and technological. For each global risk, some circles the threat from greenhouse survey respondents were asked, “On a scale from 1 to 5, how likely is this risk to occur over the next 10 years?”, and “If it were gas emissions made nuclear energy seem to occur, how big would you rate the impact of this risk?” The aggregated responses to these two questions are depicted in less hazardous than fossil fuels over the long the Global Risks Landscape scatterplot in Figure 2. run. Yet the nuclear catastrophe in The evaluation of the 50 risks also focused on their linkages, Fukushima, Japan, not only changed public given their interdependent nature. Survey respondents were perceptions there but also energy policy, asked to nominate pairs of risks that they believe to be stronglySection 6 connected. They were also asked to nominate a “Centre of almost overnight, in some parts of Europe. Gravity” – the systemically most important risk for each of the five categories of global risks. Putting all paired connections together results in a network diagram presented in Figure 37 in Section 4 – the Survey Findings. The survey data was also analyzed to examine how the background of the respondents affects their perceptions. Are the views of people based in Europe similar to those in Asia? Do younger people perceive the world differently from older people? And how does specialist knowledge in a field affect how risks are perceived? These questions are explored in Section 4 of this report. 14 Global Risks 2013
  • 15. Section 1The Cases – Making Sense of ComplexSystemsThe 50 global risks in this report are interdependent andcorrelated with each other. The permutations of two, three, fouror more risks are too many for the human mind to comprehend. Section 2Therefore, an analysis of the network of connections has beenundertaken to highlight some interesting constellations of globalrisks seen in Figure 3.In Section 2, these constellations of global risks are presented asthree important cases for leaders: “Testing Economic andEnvironmental Resilience” on the challenges of responding toclimate change, “Digital Wildfires in a Hyperconnected World”on misinformation spreading via the Internet, and “The Dangersof Hubris on Human Health” on the existential threat posed by Section 3antibiotic-resistant bacteria.Each case was inspired by the findings from an initial networkanalysis and further developed through extensive research intocurrent trends, potential causal effects, levels of awareness andpossible solutions. Unlike traditional scenario methodologies,the risk cases do not attempt to develop a full range of allpossible outcomes. They are instead an exercise in sense-making as well as a collective attempt to develop a compellingnarrative around risks that warrant urgent attention and action Section 4by global leaders. Readers are encouraged to refine these casesfurther and to develop their own scenarios based on the datapresented.ivX Factors from Nature – Looking EvenFurther AheadThe section on X Factors invites the reader to consider emergingconcerns that are not yet on the radar of decision-makers. If the Section 550 global risks represent “known-knowns”, then these X factorscould be considered as “known unknowns”. They were co-developed with the editors of Nature and benefit from theircontributors’ deep knowledge of cutting-edge scientific re-search that has not yet crossed over into mainstream discourse.Resilience – Preparing for Future ShocksThis year’s Special Report examines the increasingly important Section 6issue of building national resilience to global risks. It introducesqualitative and quantitative indicators to assess overall nationalresilience to global risks by looking at five national-levelsubsystems (economic, environmental, governance,infrastructure and social) through the lens of five components:robustness, redundancy, resourcefulness, response andrecovery. The aim is to develop a future diagnostic report toenable decision-makers to track progress in building nationalresilience and possibly identify where further investments areneeded. The interim study will be published this summer, andwe invite readers to review the proposed framework and toshare ideas and suggestions with the Risk Response Network.viv See also the World Economic Forum’s series of “What-If” interviews for more case studies on a variety of topics: http://forumblog.org/tag/what-if/.v For further details please refer to http://www.weforum.org/risk or contact us at rrn@ weforum.org. Global Risks 2013 15
  • 16. Section 1 Testing Economic and Environmental ResilienceSection 2 Economic and environmental systems are Five years after the financial crisis, macroeconomic worriesSection 3 continue to weigh heavily on leaders’ minds. This is confirmed simultaneously under stress worldwide, and by data from the World Economic Forum’s quarterly confidence this is testing resilience at the global and indexvi as well as the Global Risks Perception Survey, in which respondents rated major systemic financial failure as the national levels. Economic difficulties economic risk of greatest systemic importance for the next 10 years. worldwide are continuing to make greater demands on political attention and financial The very same survey respondents also identified the failure of climate change adaptation and rising greenhouse gas emissions resources. Meanwhile, the impact of climate as among those global risks considered to be the most likely toSection 4 change is more evident as temperature rises materialize within a decade. Compared to last year’s survey, the failure to adapt to climate change replaced rising greenhouse and more frequent extreme weather events gas emissions as the most systemically critical. This change in loom on the horizon. The economic and our data mirrors a wider shift in the conversation on the environment from the question of whether our climate is environmental challenges require both changing to the questions of “by how much” and “how quickly”. structural changes and strategic investments, but are countries prepared to manage both fronts, conceivably at the same time?Section 5 Figure 7: Testing Economic and Environmental Resilience Constellation Major systemic financial failure Failure of climate change adaptation Global governanceSection 6 failure Food shortage crises Water supply crises Severe income disparity Persistent extreme weather Chronic labour market imbalances Rising greenhouse gas emissions Chronic fiscal imbalances The Environmental System Unmanageable inflation or deflation The Economic System Source: World Economic Forum vi The Global Confidence Index is an index developed by the World Economic Forum that represents confidence among decision-makers in three areas: global economy, global governance and global cooperation. For greater detail, please consult: http://www. weforum.org/ConfidenceIndex 16 Global Risks 2013
  • 17. Section 1The narrative emerging from the survey is clear: like a super Figure 8: Further Required Deficit Reductions for Fiscalstorm, two major systems are on a collision course. The Sustainability (2011)resulting interplay between stresses on the economic and Philippinesenvironmental systems will present unprecedented challenges Thailandto global and national resilience. Mexico Argentina KenyaWill countries be able to address complex challenges unfolding Section 2 Malaysiaon very different time scales simultaneously? A cynic may argue Moroccothat any future environmental loss could actually have a Pakistan Brazilstimulative economic effect – this is the same rationale used to Indiacriticise GDP-driven growth policies, whereby the reconstruction Jordanfollowing a massive earthquake can boost overall GDP over the Germanylong term. However, this view ignores two realities. First, more United Kingdompeople reside and work in urban areas than ever before in Francehuman history – this concentration will continue and is likely to Belgium Icelanddrive environment-related losses to even greater historic highs. United StatesSecond, the existing debt levels of many major economies can Ireland Section 3be unsustainable. Given this fiscal constraint, we are witnessing Portugal Italythe use of extraordinary monetary policies to stimulate global Japangrowth, which some argue are essentially experimental. Greece 0 50 100 150 200 -5 0 5 10 15 20The fact remains that today’s massive socio-economic Gross debt (% of GDP) Required adjustment (% GDP)challenges demand immediate attention, yet availability of public Source: Adapted from IMF Fiscal Monitor, 2012 as cited in Global Economic Prospects: Managingresources is limited – especially to finance efforts to avert the Growth in a Volatile World. June, 2012. Washington DC: World Bank.long-term effects of climate change, which, in turn, couldseverely disrupt the global economy. We face a daunting The current eurozone instability will continue to shape globalnegative feedback loop. The logic of risk management prospects in the coming years.5 The associated risk of systemicprescribes that countries should invest today to safeguard Section 4 financial failure, although limited, cannot be completelycritical infrastructure and centres of economic activity against discarded. Given the anti-austerity protests across the eurozone,future climate-related losses that could be of much greater the election of “rejectionist” governments could lead to furthermagnitude. And there is an even more compelling political logic economic paralysis and bring the eurozone crisis to a head,6to do this in order to generate new employment and to revive potentially destabilizing the global financial system in whicheconomic growth as soon as possible. But investment in confidence is already waning.7strategic infrastructure is more easily said than done, despite theshort- and long-term benefits.1 New approaches are needed This persistent global economic fragility continues to divert ourthat are based on a meeting of minds across varied professions, attention from longer-term solutions by limiting the availability ofsectors and geographies; a capacity to act decisively is also public resources and generating greater caution in use of scarceneeded, despite considerable uncertainty about what the best funds for strategic investment projects. There are other looming Section 5plan of action might be. Hesitating to act now will only add to the issues related to ongoing prescriptions to counter economicburdens of the next generation. malaise. Will the massive quantitative easing undertaken by key central banks to stave off deflation inevitably lead to destabilizingPersistent Global Economic Fragility hyper-inflation? Will structural economic reforms deliver the necessary employment gains over the long run?The global economic situation remains fragile. The InternationalMonetary Fund projects slow growth in the advancedeconomies, an annual rate of between 1.3% and 2.6% between2012 and 2017.2 Combined with fiscal fragility, this will continueto strain government spending. Given the current levels of Section 6government debts and deficits in these economies, “it will takeyears of concerted political and economic effort before debt toGDP levels of the United States, Japan and many Euro Areacountries are brought down” to stabilize at lower levels.3 Also,the economic growth of emerging markets and developingeconomies is projected to be slower than at its peak in 2010.4 Global Risks 2013 17
  • 18. Section 1 The Changing Debate on the Global Recent climate and weather events, some of which are visualized in Figure 10, have reminded us of the economic and Climate human cost of the kind of natural disasters that we know are likely to become more frequent and severe as climate continues Mitigation efforts have made significant progress at country level to change. The estimated economic loss of the 2011 Thailand in the past 15 years in areas such as emissions regulations and floods, for example, was US$ 30 billion,12 and of Hurricane financial incentives – for example, the US$ 3.4 billion made Katrina US$ 125 billion; meanwhile, the 2003 European heatSection 2 available to match private sector investment funds in the US wave resulted in more than 35,000 fatalities13 and the Horn of Smart Grid Investment Grant program.8 Nonetheless, in today’s Africa droughts in 2011 claimed tens of thousands of lives and increasingly multi-polar geopolitics, it has become harder to threatened the livelihoods of 9.5 million people.14 More recently, reach and effectively implement international agreements on Hurricane Sandy left a heavy bill, estimated today at over US$ climate change mitigation. Pledges made in the run-up to the 70 billion for New York and New Jersey alone.15 Such events 2009 Copenhagen climate change negotiations, which were remind us that many economies remain vulnerable to damages intended to limit global warming to 2 degrees Celsius, now arising from climatic events today, let alone those of the future.16 appear collectively insufficient to meet this target of 2 degrees.9 Recent scenario projections based on existing government While there is no consensus on how fast and how much our policies and declared policy intentions predict that a long-term climate is changing, the growing realization that some degree ofSection 3 increase of more than 3.5 degrees Celsius is probable. The climate change is inevitable is reflected in a shifting of the debate more pessimistic scenario assuming no change in government to how to adapt. Advocating for greater attention to be paid to policies and measures beyond those adopted or enacted by adaptation is controversial in some quarters as it is interpreted mid-2011 talks of a conceivable increase of 6 degrees Celsius or as a tacit admission that mitigation efforts are no longer worth more.10 pursuing. However, the less effective mitigation efforts are, the more pronounced adaptation challenges will become; therefore, If the current mitigation commitments remain unmet, a global mitigation and adaptation need to be addressed in concert while mean temperature increase of 4 degrees Celsius could occur as taking advantage of all possible synergies. early as the 2060s. This would likely lead to negative impacts including an increase in the frequency of high-intensity tropicalSection 4 cyclones, inundation of coastal cities as sea levels rise, and increased drought severity in several regions. Together, the effects would not only mean significant economic losses but also mass displacement of populations, rising food insecurity and aggravated water scarcity11 (also see Figure 9). Figure 9: Possible Impact of Global Warming on Different Sectors Temperature above preindustrial - IPCC scenario A1BSection 5 Year of impact: 2030 2050 2080 1°C 2°C 3°C 4°C 5°C Weather More intense storms, forest fires, droughts, flooding and heat waves Threat to local water Changes in water availability, threatening up to a billion Major cities around the world Water supply as glaciers melt people threatened by sea level riseSection 6 Food Falling crop yields in many developing regions Falling yields in many developed regions Ecosystems extensively Many more species Ecosystem and irreversibly damaged face extinction Social More than a billion people may have to migrate - increasing the risk of conflicts Source: Adapted from Shaping Climate-Resilient Development: A Framework for Decision-Making. 2009. Economics of Climate Adaptation Working Group. 18 Global Risks 2013
  • 19. Section 1Figure 10: 2011 Economic Losses Related to Selected Natural Catastrophes Section 2 >US$25,000m US$5,000m - US$25,000m Section 3 US$1,000m - US$5,000m US$250m - US$1,000m US$100m - US$250m US$50m - US$100m < US$50m Earthquake, Tsunami, Volcano Extreme Weather Flood Storm, Hail Section 4Source: Adapted from sigma natural catastrophe data base of Swiss Reinsurance Company.A number of climate adaptation related initiatives and reports Decisive Action in a Climate ofhave been emerging.vii While poorer countries will need helpfrom the international community to finance adaptation Uncertaintyinvestments, adaptation efforts are by their nature local, withcountries, companies and individuals being largely responsible As the consensus that the climate change is becoming morefor their own adaptation costs. evident grows, data across many disciplines (including forestry, water and land management, for example) remains Section 5While it is possible to make various different underlying limited, not readily available or communicated in a format thatassumptions in modelling the effects of climate change, it is might not facilitate actionable decisions on climate adaptation.clear that the economic costs are likely to be considerable. A Yet, future climate risks may require human judgement todayreport by Mercer,17 which considers the cumulative economic or in the coming years, while the full scientific data may notcost of changes to the physical environment, health and food come until it is too late. Complex systems such as the climatesecurity due to climate change, quotes a possible range of US$ are non-linear by nature – chain reactions through the system2 trillion to US$ 4 trillion by 2030 across different climate are unpredictable and not directly proportional to the size ofscenarios.18 The EU Climate Change Expert Group suggests the triggers. A limited amount of data and constraints onthat the costs of climate change impacts, increasing in computational power have been strong impediments tomagnitude with the rises in global temperature, may amount to bringing greater clarity into predicting future climatic Section 65% to 20% of GDP (or higher) in the long term.19 developments at a local level.23,24 For instance, there have been inconclusive predictions regarding the likely impacts ofSome people affected by climate change may seek to recover global warming on rainfall patterns in Guyana: possibilitiescosts from past emitters of greenhouse gases. Although the ranged from a 5% rainfall decline by 2030, lessening the risk ofAlaskan village of Kivalina – which faces being “wiped out” by flooding, to a 10% rainfall increase, worsening this riskthe changing climate – was unsuccessful in its attempts to file a significantly.25US$ 400 million lawsuit against oil and coal companies,20,21future plaintiffs may be more successful. Five decades ago, the Faced with uncertainty about the likely effectiveness and riskUS tobacco industry would not have suspected that in 1997 it of unintended consequences of a proposed intervention,would agree to pay US$ 368 billion in health-related damages.22 policy-makers can be paralyzed by a desire to wait for moreFor some businesses, investing in climate change mitigation detailed analyses and data regarding the precise timing,now could be as much about enterprise risk management as manifestation or impact of future climatic changes in their localabout mitigating a global risk. environments. Greater support for scientific research, better computational power and data are needed to shed greatervii clarity into predicting future climatic developments, especially For examples please see “Shaping Climate-Resilient Development: A Framework for Decision-Making” by the Economics of Climate Adaptation Working Group, “Managing the the climate and weather extremes. Risks of Extreme Events and Disasters to Advance Climate Change Adaptation” Special Report of the Intergovernmental Panel on Climate Change, and Private Sector Initiative of the UNFCCC’s Nairobi Work Programme featuring good practices and climate change adaptation activities undertaken by the private sector (some of which have been carried out in partnership with NGOs or the public sector) across different regions and sectors.39 Global Risks 2013 19
  • 20. Section 1 While this will come, can leaders embrace the need to make a Exploring New Approaches with decision without the complete assurance that they are making the best decision? This is more easily said than done, especially Climate-Smart Mindsets when there are competing demands for attention and resources. For example, the 2008 financial crisis shows how Acknowledging the effect of our cognitive biases may be the urgent macroeconomic difficulties can divert attention from first step towards building resilience against a future perfect other significant global governance challenges, from climate storm of economic and environmental challenges. Only thenSection 2 change negotiations to the Millennium Development Goals. Yet can we start weighing the various demands equally, in the near the actions of the G20 during the crisis also demonstrate the and the long term, on scarce public resources and dwindling potential for bold, coordinated international action. risk-mitigation budgets. As global risks ultimately require a national response, much To reconcile the challenge of building environmental resilience more attention must be given to how decisions are made in the amid economic stress, current policies and strategies may face of such overwhelming economic and environmental need to be re-evaluated. For instance, in several countries, challenges. Perception is typically regarded as a passive government insurance schemes and building-permit policies process, in which people view an objective reality. Yet continue to encourage further urbanization in coastal or high perception is actually an active process of understanding, flood risk areas rather than preventing it.33 In doing so, they maySection 3 through which people construct their own version of reality.26 be creating large pockets of vulnerability to climate risks. A Research in cognitive psychology and decision-making 2007 OECD study analysing 136 port cities around the world suggests that people use “rules of thumb” to make judgements concluded that the population exposed to coastal flooding in the face of ambiguity and complexity.viii This approach usually could triple by the 2070s due to the combined effects of climate serves well but can lead to predictably faulty judgements under change and urbanization, among others.34 some circumstances. Psychologists call such predictably faulty judgements cognitive biases,27 and these biases influence how In light of the increased certainty that global temperatures will we respond to the best information at our disposal and rise to some extent, a “climate-smart” mindset needs to integrate it in decision-making structures. permeate all levels of decision-making. “Climate-smart” is a term that originated in agriculture, to describe such agriculture Cognitive biases become important when addressing theSection 4 that not only increases resilience in light of climate adaptation slow-moving future threat of climate change in the context of but also reduces greenhouse gas emissions.35 A climate-smart an ongoing unstable economic outlook. Some examples are: mindset incorporates climate change analysis into strategic and -- We tend to place too much emphasis on recent personal operational decision-making. It entails a search for synergies experience when estimating the likelihood of a risk across climate change mitigation- and adaptation-related occurring. For example, experience in the United States efforts where possible. Such a mindset needs to become an shows that many more people buy flood insurance integral part of our urban planning, water- and food-security immediately after a major flood. On average, those people management, investment policy, and demographic policy hold flood insurance for only two to four years before letting development, among others. In 2006, during its term over the it lapse if they have not suffered a claim because they are rotating European Union presidency, Finland introduced a likely to view insurance as a bad investment rather thanSection 5 policy innovation which encouraged ministers with other seeing it as a form of protection.28 portfolios – from transport and urban planning, to agricultural -- Through a process known as hyperbolic discounting, we and employment policies – to consider the effects of their tend to give disproportionately more weight to immediate decisions on the population’s health.36 Something similar may costs and benefits than to delayed ones. Individuals, for be needed to ensure that all ministers enact policies in their instance, may often be reluctant to incur the upfront costs domains that are informed by a climate-smart mindset. of measures such as investing in climate change adaptation measures when the benefits will not be felt for several The current debt crisis of several leading economies will make it years.29,30 more difficult to finance climate-smart activities, such as the Smart -- We fail to take protective measures if the perceived Grid Investment Grant. That said, the private sector has a critical role here as well. In the United States, around 80% of criticalSection 6 likelihood of the risk in question is below our threshold level of concern – for example, discounting entirely the possibility infrastructure is owned or operated by the private sector, not of a natural catastrophe that has a low chance of occurring. governments.37 It is likely that many of the preparations to weather This bias is exacerbated by a tendency to underestimate the colliding economic and environmental storm systems will be the likelihood of a negative event occurring due to found in private-sector initiatives to reinforce critical assets and misperceptions of the risk.31,32 shield them from potential future risks and liability. The cumulative effect of such cognitive biases is that we may Given the pressure on public finances generally and their not pay due attention to, or act effectively on, risks that are scarcity to address climate change-related challenges, new perceived to be long-term and relatively uncertain. The funding models will need to be found. Private funds can be impossibility of fully eradicating ambiguity, along with the unlocked through innovative public-private collaboration that relatively lengthy time scales involved, mean that cognitive ranges across disciplines as well as stakeholders. In order to biases are likely to remain significant hurdles to be enable scalable, effective partnerships, a variety of actors and acknowledged and overcome on the path towards effective professional disciplines will need to converge on mutually action on climate change and related risks. beneficial and economically sustainable solutions. This is no minor task since, in addition to the diversity of interests at stake, different professionals often have conflicting biases and have been trained to think in siloed ways. Yet such partnerships have viii The phrase “rule of thumb” means a quick and easy way of making estimates, based on started to emerge. experience that will not be precisely accurate but will nonetheless be adequate for most everyday situations. 20 Global Risks 2013
  • 21. Section 1In order to address the current shortfall in green infrastructure in Box 2: The Green Growth Action Alliancea number of emerging economies, more than 50 leadingcompanies from finance, infrastructure, energy and agriculture (G2A2)sectors joined public institutions to form the Green GrowthAction Alliance (G2A2). As described in greater detail in Box 2, As emerging economies grapple with how to grow theirthe aim of this initiative is to unlock greater sums of private economies without worsening their environments, many areinvestment for green infrastructure. developing “green growth” strategies designed to attract Section 2 investment in sustainable water, energy, transport andOther examples of innovative partnerships include a company in agricultural infrastructure. Up to US$1 trillion a year of privateChina which has partnered with government, industry sector investment is needed, according to the 2012 B20 Greenassociations and international NGOs to enable a sector-wide Growth Task Force. However, due to the limited track record ofreplication of green prefabrication production, currently saving some technologies, combined with the perception of investment360 hectares of forest and 314,000 tons of greenhouse gas risk, private capital providers are often reluctant to invest inemissions a year; and the Desertec Foundation for Clean Energy green growth.Generation, which assisted in founding an industrial initiative of55 industrial and financial companies and institutions working to To address the current shortfall in green infrastructureenable large-scale generation of renewable power from deserts investment, more than 50 leading companies from finance, Section 3to serve markets in North Africa, Middle East and Europe.38 infrastructure, energy and agriculture sectors joined with public finance institutions to launch the Green Growth Action AllianceAs the world faces a squeeze in public funds at the same time (G2A2) at the 2012 G20 Summit in Mexico. Chaired by the thenas the effects of climate change are increasing, it is only through Mexican President Felipe Calderón, the G2A2 will pursue fourcollaboration among governments (to further the public strategic activities over a two-year timeframe:interest), businesses (to search for innovative products andsolutions), legal experts (to mitigate fear of liability), science (to 1. Highlight innovative models for public-privatebring good quality supporting data and analyses) and the collaboration: The G2A2 will launch a report at the 2013financial sector (to innovate and avoid future damaging costs) World Economic Forum Annual Meeting identifying existingthat the limits of environmental and economic resilience can be sources of finance and pinpointing innovative ways for publicsuccessfully navigated. policy to unlock private funds. Section 4 2. Stimulate private investment at country level: The G2A2 is working with the governments of Kenya, Vietnam and MexicoQuestions for Stakeholders to incubate innovative financing models with the domestic and international private sector.-- How will we reconcile climate change mitigation and 3. Provide new ideas and models to shape the policy adaptation efforts with the desire for prosperity given current agenda: The G2A2 has formed working groups on green demographic trends? free trade, end-user financing of renewable energy,-- How can like-minded municipalities, companies and institutional investors and energy efficiency. The energy communities drive forward a new set of climate-smart efficiency working group is looking to pilot new financing Section 5 approaches that avoid cognitive biases? structures for energy services companies; the green free- trade group has led calls to establish free-trade regulations for-- How can we rethink cross-industry collaboration to find the clean technologies such as solar. right balance between competition and cooperation among companies in a resource-constrained and increasingly 4. Help to scale up and replicate successful approaches: To interconnected world? help governments, development banks and finance institutions to ensure rapid replication and to scale up successful models, the G2A2 will document case studies in the Green Investment Report and engage with policy platforms and investor networks, such as the G20 Development Working Group and Finance Track group on Section 6 climate finance, the UNFCCC’s Momentum for Change Initiative and the International Development Finance Club. The G2A2 will also collaborate closely with the UN Sustainable Energy for All Initiative and the Global Investor Coalition on Climate Change. The World Economic Forum is serving as the secretariat for the G2A2. Global Risks 2013 21
  • 22. Section 1 References 1. Strategic Infrastructure Steps to Prioritize and Deliver Infrastructure Effectively and Efficiently. September, 2012. Geneva: World Economic Forum in collaboration with PwC. 2. World Economic Outlook: Coping with High Debt and Sluggish Growth. October, 2012. Washington DC: International Monetary Fund. 3. Global Economic Prospects: Managing Growth in a Volatile World. June, 2012. Washington DC: World Bank.Section 2 4. World Economic Outlook: Coping with High Debt and Sluggish Growth. October, 2012. Washington DC: International Monetary Fund. 5. Global Economic Prospects: Managing Growth in a Volatile World. June, 2012. Washington DC: World Bank. 6. Eichengreen, B. “Europe’s Populists at the Gate”. Project Syndicate, A World of Ideas, http:// www.project-syndicate.org/commentary/the-political-risk-to-the-euro-by-barry-eichengreen, 2012. 7. Tonkin, S. “Global Experts Poll: Economic Confidence Plummets to Lowest Level in Five Quarters”. World Economic Forum, http://www.weforum.org/nr_gci5. 8. Smart Grid Investment Grant Program, Progress Report. July, 2012. U.S. Department of Energy, Electricity Delivery and Energy Reliability. 9. Too Late for Two Degrees? Law Carbon Economy Index 2012. November, 2012. PricewaterhouseCoopers LLP. 10. World Energy Outlook 2011. 2011. Paris: International Energy Agency. 11. Turn Down the Heat. Why 4 C Warmer World Must Be Avoided. A Report for the World Bank bySection 3 the Potsdam Institute for Climate Impact Research and Climate Analytics. November, 2012. Washington DC: World Bank. 12. Natural Catastrophes and Man-Made Disasters in 2011: Historic Losses Surface from Record Earthquakes and Floods. November, 2012. Zurich: Swiss Reinsurance Company. http://direito.folha.uol.com.br/uploads/2/9/6/2/2962839/natural_catastrophes_and_man_ made_disasters_2011.pdf. 13. Shaping Climate-Resilient Development: A Framework for Decision-Making. 2009. Economics of Climate Adaptation Working Group. 14. Tavanti, M. “From Food Insecurity to Food Security: Understanding Human and Food Security Implications for Somalia and the Horn of Africa”. Somalia Strategy Review, http://www. somaliastrategyforum.org/journal/v1i1/tavanti_foodsecurity_v1i1.pdf, 2012. 15. “Hurricane Sandy’s Rising Costs.” The New York Times, http://www.nytimes.com/2012/11/28/ opinion/hurricane-sandys-rising-costs.html, 2012. 16. Shaping Climate-Resilient Development: A Framework for Decision-Making. 2009. Economics of Climate Adaptation Working Group.Section 4 17. Climate Change Scenarios–Implications for Strategic Asset Allocation. 2011. Mercer. 18. Ibid. 19. The 2°C Target. Background on Impacts, Emission Pathways, Mitigation Options and Costs. July, 2008. EU Climate Change Expert Group. 20. Lean, G. “Micronesia Lawsuit Highlights Climate Change Litigation”. The Telegraph, http://www. telegraph.co.uk/earth/environment/climatechange/8533367/Micronesia-lawsuit-highlights- climate-change-litigation.html, 2011. 21. Saxe, D, James, M. “Kivalina Loses its Climate Change Nuisance Case Again”. http://envirolaw. com/kivalina-loses-climate-change-appeal/, 2012. 22. Gruber, J. “The Economics Of Tobacco Regulation”. Health Affairs, http://content.healthaffairs. org/content/21/2/146.full, 2011. 23. Based on comments from expert review. 24. Palmer, T. A CERN for Climate Change. In Physics World, 2011, 24:14-15.Section 5 25. Shaping Climate-Resilient Development: A Framework for Decision-Making. 2009. Economics of Climate Adaptation Working Group. 26. Heuer, R.J. Psychology of Intelligence Analysis. Center for the Study of Intelligence, Central Intelligence Agency, 1999. https://www.cia.gov/library/center-for-the-study-of-intelligence/ csi-publications/books-and-monographs/psychology-of-intelligence-analysis/PsychofIntelNew. pdf 27. Ibid. 28. Michel Kerjan, E., Lemoyne de Forges, S. and Kunreuther, H. Policy Tenure Under the US National Flood Insurance Program (NFIP). In Risk Analysis, 2011, 32(4):644-658. 29. Michel-Kerjan, E. Overcoming Decision Biases to Reduce Lossesfrom Natural Catastrophes. In E. Shafir (ed), Behavioural Foundations of Policy. 2012. Princeton: Princeton University Press 30. Laibson, D. Golden Eggs and Hyperbolic Discounting. In The Quarterly Journal of Economics, 1997, 112(2):443-478. 31. Based on comments from expert review. 32. Kunreuther H., Meyer, R. and Michel-Kerjan, E. Overcoming Decision Biases to Reduce LossesSection 6 from Natural Catastrophes.Behavioural Foundations of Policy. In E. Shafir (ed), 2012. Princeton: Princeton University Press. 33. Based on comments from expert review. 34. Nicholls, R.J., Hanson, S. and Herweijer, C. et al. Ranking of the World’s Cities Most Exposed to Coastal Flooding Today and in the Future, Executive Summary. 2007. Organisation for Economic Co-operation and Development. 35. “Climate-Smart” Agriculture: Policies, Practices and Financing for Food Security, Adaptation and Mitigation. 2010. Rome: Food and Agriculture Organization of the United Nations. 36. Puska, P. Health in All Policies. In The European Journal of Public Health, 2007, 17(4):328. 37. Report of the Critical Infrastructure Task Force. January, 2006. Homeland Security Advisory Council, http://www.dhs.gov/xlibrary/assets/HSAC_CITF_Report_v2.pdf 38. Annex to the Message from the Friends of Rio+20. 2012. The Friends of Rio+20. http://www3. weforum.org/docs/WEF_FriendsRio20_Annex_2012.pdf 39. “Private Sector Initiative - Database of Actions on Adaptation”. United Nations Framework Convention on Climate Change, http://unfccc.int/adaptation/nairobi_work_programme/ private_sector_initiative/items/6547.php, 2012. 22 Global Risks 2013
  • 23. Section 1Digital Wildfires in aHyperconnected World Section 2The global risk of massive digital In 1938, when radio had become widespread, thousands of Americans Section 3 confused an adaptation of the H.G. Wells novel War of the Worlds with amisinformation sits at the centre of a news broadcast and jammed police station phone lines in the panickedconstellation of technological and belief that the United States had been invaded by Martians.geopolitical risks ranging from terrorism to It is difficult to imagine a radio broadcast causing comparably widespread misunderstanding today. In part this is becausecyber attacks and the failure of global broadcasters have learned to be more cautious and responsible,governance. This risk case examines how in part because the media is a regulated industry, and in part because listeners have learned to be more savvy and sceptical.hyperconnectivity could enable “digital Moreover, the news industry itself is undergoing a transformation as Section 4wildfires” to wreak havoc in the real world. It the Internet offers multiple options to confirm or refute a breaking news story. But the Internet, like radio in 1938, is a relatively youngconsiders the challenge presented by the medium. The notion that a tweet, blog or video posting could drive amisuse of an open and easily accessible similar public panic today is not at all far-fetched.system and the greater danger of misguided The Internet remains an uncharted, fast-evolving territory. Currentattempts to prevent such outcomes. generations are able to communicate and share information instantaneously and at a scale larger than ever before. Social media increasingly allows information to spread around the world at breakneck speed. While the benefits of this are obvious and well Section 5 documented, our hyperconnected world could also enable the rapid viral spread of information that is either intentionally or unintentionally misleading or provocative, with serious consequences. The chances of this happening are exponentially greater today than when the radio was introduced as a disruptive technology, despite our media sophistication. Radio was a communication channel of “one to many” while the Internet is that of “many to many”.Figure 11: Digital Wildfires in a Hyperconnected World Constellation Section 6 Critical systems failure Cyber attacks Massive digital misinformation Massive incident of data fraud/theft Terrorism Rising religious fanaticism Failure of diplomatic conflict resolution Major systemic financial failure Major systemic financial failure Global governance failure Backlash against globalizationSource: World Economic Forum Global Risks 2013 23
  • 24. Section 1 The Internet does have self-correcting mechanisms, as Wikipedia Figure 13: Users Timeline demonstrates. While anyone can upload false information, a US Internet users who use social networks sites, by age, community of Wikipedia volunteers usually finds and corrects errors in percentage of each group speedily. The short-lived existence of false information on its site is generally unlikely to result in severe real-world consequences; 100 18-29 years however, it is conceivable that a false rumour spreading virally 30-49 years 83% 86% 80 50-64 years through social networks could have a devastating impact before 73% 76%Section 2 65+ years 67% being effectively corrected. It is just as conceivable that the offending 58% 61% 60 content’s original author might not even be aware of its misuse or 48% 47% misrepresentation by others on the Internet, or that it was triggered 36% 40 36% by an error in translation from one language to another. We can think 25% 25% of such a scenario as an example of a digital wildfire. 20 16% 26% 16% 11% 22% 12% 7% 4% 13% How might digital wildfires be prevented? Legal restrictions on 0 5% 7% online anonymity and freedom of speech are a possible route, Sep 2005 May 2008 Nov 2008 Apr 2009 Dec 2009 May 2010 but one which may also have undesirable consequences. And what if the source of a digital wildfire is a nation state or anSection 3 international institution? Ultimately, generators and consumers of Source: Adapted from “Search Engine Journal”, http://www.searchenginejournal.com/ wp-content/uploads/2011/09/social-media-black.jpeg, 2012. social media will need to evolve an ethos of responsibility and healthy scepticism similar to that which evolved among radio broadcasters and listeners since the infamous War of the Worlds Benefits and Risks of Social Media broadcast in 1938. This risk case asks if explicitly recognizing the potential problem and drawing attention to possible solutions From cuneiform to the printing press, it has always been hard to could facilitate and expedite the evolution of such an ethos. predict the ways in which new communication technologies will shape society. The scale and speed of information creation and transfer in today’s hyperconnected world are, however, historically unparalleled. Facebook has reached more than 1 billion activeSection 4 users in less than a decade of existence, while Twitter has attracted over 500 million active users in seven years. Sina-Weibo, China’s dominant micro-blogging platform, passed 400 million active accounts in summer 2012.1 Every minute, 48 hours’ worth of content is uploaded to YouTube. The world of social media is multicultural and young. Figures 12 and 13 show the preferences across the world for different social networking platforms, and the trends of social media use by age group in the United States. Figure 12: The World of Social MediaSection 5 Leading social media networks by country Russia VKontakte Odnoklassniki Facebook UK FacebookSection 6 Twitter USA Linkedin Japan Facebook Mixi Twitter Egypt China Twitter Linkedin Facebook Qzone Facebook Twitter Sina Weibo Dominating networks Renren by country Facebook India Facebook Qzone Orkut VKontakte Twitter Brasil Odnoklassniki Orkut Orkut Facebook Australia Mixi Twitter Facebook South Africa Zing Facebook Twitter Twitter Linkedin Cloob Draugiem Linkedin No data Source: Adapted from “Search Engine Journal”, http://www.searchenginejournal.com/wp-content/uploads/2011/09/social-media-black.jpeg, 2012. 24 Global Risks 2013
  • 25. Section 1This phenomenon has many transformative effects. Studies of The other dangerous situation is when information circulatesTwitter and Facebook activity in Egypt and Tunisia leave no doubt within a bubble of likeminded people who may be resistant toabout the role social media played in facilitating the Arab Spring.2,3 attempts to correct it. In the case of the Sandy NYSE tweet,The social networking site Patientslikeme.com connects other Twitter users rapidly posted accurate information, andindividuals with others who have the same conditions and is nobody had a vested interest in continuing to believe the original,helping to expedite the development of new treatments. Analysis of false information.16 Cases in which false information feeds into anTwitter messages and networks has successfully predicted existing worldview, making it harder to dislodge, are far from Section 2election results,4 movie box office success5 and consumer unimaginable. This may be more of a problem with socialreactions to specific brands, among other things.6,7 networks where information is less publicly visible, for example, through friend networks on Facebook or more “opaque” socialHowever, some individuals and organizations have suffered losses networks such as e-mail or text messaging.17 The spread ofdue to the capacity for information to spread virally and globally misinformation in such “trusted networks” can be especiallythrough social media. Some examples: difficult to detect and correct since recipients are more likely to-- When a musician travelling on United Airlines had his claim for trust any information originating from within the network. damages denied on a guitar that baggage handlers had allegedly broken, he wrote and performed a song – “United We should, therefore, not underestimate the risk of conflicting Breaks Guitars” – and uploaded it to YouTube, where it has false rumours, circulating within two online bubbles of Section 3 been viewed more than 12 million times. As the video went likeminded individuals, creating an explosive situation. The viral, United Airlines stock dropped by about 10%, costing extensive use of Twitter by both sides during the November 2012 shareholders about US$ 180 million.8,9 clashes between Israel and Hamas in Gaza18 points to the possibility of future situations in which competing versions of-- In November 2012, the BBC broadcast an allegation that a events are propagated in self-reinforcing loops among groups of senior politician had been involved in child abuse, which people who are predisposed to believe one side or the other and transpired to have been a case of mistaken identity on the do not share a common information source that might help to part of the victim. Although the BBC did not name the dissipate some of the self-amplified information loops. politician, his identity was easily discovered on Twitter, where he was named in about 10,000 tweets or re-tweets.10 On top of pursuing legal action against all the people who spread this “Astroturfing”, Satire, “Trolling” and Section 4 false information on Twitter, the injured politician settled on £185,000 in damages with the BBC.11 Attribution Difficulties-- The existence on YouTube of a video entitled “Innocence of Muslims”, uploaded by a private individual in the United While it is certainly possible for a digital wildfire to start States, sparked riots across the Middle East. These riots are accidentally, it is also possible for misinformation to be estimated to have claimed over 50 lives.12 deliberately propagated by those who stand to reap some kind of benefit. Some examples:These are very different cases – a humorous response from a -- In politics, the practice of creating the false impression of adisgruntled customer, a defamation of character and an affront to grassroots movement reaching a group consensus on anreligious sensibilities. What unites them is that hyperconnectivity issue is called “astroturfing”. During the 2009 Massachusetts Section 5amplified their impacts to a degree that would have been special election for the US Senate, a network of fake Twitterunthinkable in a pre-Internet age, when only a small number of accounts successfully spread links to a website smearing onelarge organizations had the capacity to broadcast information of the candidates.19widely. This new reality has some challenging implications. -- Fake tweets have moved markets, offering the potential to profit from digital wildfires. A Twitter user impersonating theWhen Digital Wildfires Are Most Dangerous Russian Interior Minister Vladimir Kolokoltsev in July 2012 tweeted that Syria’s President Bashar al-Assad “has been killed or injured”, causing crude oil prices to rise by overAs Hurricane Sandy battered New York in October 2012, an US$ 1 before traders realized the news was false.20anonymous Twitter user tweeted that the New York Stock -- Thirty thousand people of Assam origin fled the tech centre Section 6Exchange trading floor was flooded by three feet of water. Other Bangalore in panic in 2012 after receiving text messagesTwitter users quickly corrected the false rumour, though not warning that they would be attacked in retaliation forbefore it was reported on CNN.13 In Mexico, there have been communal violence in their home state.21,22cases of mothers needlessly keeping their children from schooland shops closing due to false rumours of shootouts spreading Executives interviewed by Forbes and Deloitte placed socialthrough social networks.14 In the UK, the video imagery related media among the greatest risks that their corporations face.23to a low level tactical incident of the British Army in Basra, For example, after the BP oil spill in the Gulf of Mexico, a parodyspread through Reuters agency feed, YouTube and Blinkx, led to Twitter account quoting the chief executive Tony Hayward asa misleading impression of a significant military failure among the saying such things as “Black sand beaches are very trendy inBritish public which was never fully eradicated.15 some places” attracted 12 times more followers than BP’s corporate Twitter account.24 While this example might have beenThese cases indicate one of the two situations in which digital intended to be humorous, it is possible for satire to be mistakenwildfires are most dangerous: in situations of high tension, when for fact. In October 2012, Iran’s official news agency ran a storyfalse information or inaccurately presented imagery can cause that originated on the satirical website The Onion, claiming thatdamage before it is possible to propagate accurate information. opinion polls showed Mahmoud Ahmadinejad was moreThe real-world equivalent is shouting “fire!” in a crowded theatre popular than Barack Obama among rural white Americans.25– even if it takes only a minute or two for realization to spreadthat there is no fire, in that time people may already have beencrushed to death in a scramble for the exit. Global Risks 2013 25
  • 26. Section 1 More worrying for businesses may be misinformation that photos depicting sharks swimming in New Jersey streets and the circulates at a time when markets are already anticipating an Statue of Liberty with monstrous looming storm clouds. Social important announcement. On 18 October 2012, NASDAQ halted media analysts say this is not surprising, as visual content tends to trading on Google shares as a leaked earnings report (coupled spread further than text alone. In addition, the actual misinforming with weak results it entailed) triggered a US$ 22 billion plunge in tweets posted by @ComfortablySmug and @CNNweather peaked Google’s market capitalization.26 In this case, the information was at significantly fewer re-tweets compared to the correction posted from a credible source, but it demonstrates impacts that could also by @BreakingNews, even though the corrected information wasSection 2 be achieved by unfortunately timed misinformation or rumours. posted within an hour of the misinforming tweet.32 It is not always easy to trace the source of a digital wildfire. It would One can speculate that people may have been more willing to be possible for careful cyber attackers to cover their tracks, raising re-tweet the photos of sharks and the Statue of Liberty because the possibility of an organization or country being falsely blamed for they were harmless and surprising and, most important, had propagating inaccurate or provocative information. Depending on significant entertainment value. The entertainment value may also existing tensions, the consequences of the false attribution could explain the lack of interest in circulating the correction tweets from be exponentially worse than if no attribution had been made. @BreakingNews. People may have been less prepared to re-tweet information that could be tied to serious consequences, such as NYSE flooding, before verifying. This suggests that norms may be Towards a Global Digital EthosSection 3 emerging, and also re-emphasizes the fact-checking responsibility of trusted sources of information such as CNN. Slips like this could Around the world, governments are grappling with the question one day be a litigation risk for media corporations. of how existing laws which limit freedom of speech, for reasons such as incitement of violence or panic, might also be applied to Figure 14: Re-Tweets Over Time online activities. Such issues can be highly controversial: in the 2000 Shark swimming in Jersey United Kingdom, courts initially convicted a man for making a Crazy clouds over Liberty joke on Twitter in which he threatened to blow up an airport in @comfortablysmug - NYSE flooding frustration at the cancellation of his flight – a conviction later 1500 @cnnweather - NYSE flooding overturned on appeal.27 @BreakingNews - fixing misinformationSection 4 Counts per hour 1000 Establishing reasonable limits to legal freedoms of online speech is difficult because social media is a recent phenomenon, and digital social norms are not yet well established. The question 500 raises thorny issues of the extent to which it would be possible to impose limits on the ability to maintain online anonymity, without seriously compromising the usefulness of the Internet as a tool for 30 Oct 31 Oct whistle-blowers and political dissidents in repressive regimes. Source: “#Sandy: Social Media Mapping”. Social Flow, http://blog.socialflow.com/ post/7120245759/sandy-social-media-mapping, 2012. Even if the imposition of such limits were enforceable, what authority would we trust to do it? The World Conference on In addition to seeking ways to inculcate an ethos of responsibilitySection 5 International Telecommunications in Dubai aiming to revise the among social-media users, it will be necessary for consumers of 1988 treaty governing the International Telecommunications social media to become more literate in assessing the reliability and Union28 sparked controversy in December 2012 when critics bias of sources. Technical solutions could help here. Researchers argued that seemingly innocuous technical regulations could have and developers are working on programmes and browser unintended negative consequences. Rules “ostensibly designed to extensions, such as LazyTruth,33 Truthy34 or TEASE35, that aim to do everything from fight spam to ensure ‘quality of service’ of help people assess the credibility of information and sources Internet traffic could be used by individual governments to either circulating online. It is possible to imagine the development of more throttle back incoming communications or weed out specific broad and sophisticated automated flags for disputed information, content they want to block”.29 As some revised treaty provisions which could become as ubiquitous as programmes that protect were believed to “give a U.N. stamp of approval to state censorship Internet users against spam and malware.Section 6 and regulation of the Internet and private networks”,30 the United States refused to sign the amended treaty; a decision seconded Feedback ratings on eBay, which enable users to assess the by Canada and several European countries.31 reliability of vendors, offer a potential template for the development of such a service. Until now, most rating systems are limited to When the incentives behind installing “quality” checks are specific websites – users do not carry their rating with them as a questionable, who can be trusted? And how do you create an record of credibility wherever they go online. It remains still to be established and recognized authority that can intervene or seen if that would be a desirable or feasible model. Information disrupt misinformation flows when they happen? disputed for ideological reasons or deliberate misattribution will continue to pose a number of challenges; however, a system could There are also profound questions of education and incentives. be developed that would trace information to its source and Users of social media are typically much less knowledgeable than provide information on whether the source was considered by a editors of traditional media outlets about laws relating to issues such broader community to be official. The system could also reveal as libel and defamation. Many also have less to lose than traditional how widely the source was trusted by a spectrum of other Internet media outlets from spreading information that has not been properly users – all while protecting the identity of the source. fact-checked. But there are signs that new norms may be emerging. Figure 14 plots misinformation and correction tweets during It is not yet clear what a global digital ethos would look like, or how Hurricane Sandy in October 2012. The misinforming tweet @ it could best be helped to develop. But given the risks posed by ComfortablySmug’s about the NYSE floor flooding received digital wildfires in our hyperconnected world, leadership is needed substantially fewer re-tweets than the tweets that circulated fake to pose these difficult questions and start the discussion. 26 Global Risks 2013
  • 27. Section 1Questions for Stakeholders References-- Controlling the spread of false information online, either 1. “SINA Reports Third Quarter 2012 Financial Results”. SINA, http://phx.corporate-ir.net/phoenix. zhtml?c=121288&p=irol-newsArticle&ID=1759522&highlight=, 2012. through national laws or sophisticated technologies, raises 2. Howard, P.N., Duffy, A., Freelon, D. et al. “Opening Closed Regimes: What Was the Role of sensitive questions on the limits to the freedom of speech – a Social Media During the Arab Spring?” PITPI, http://pitpi.org/index.php/2011/09/11/ opening-closed-regimes-what-was-the-role-of-social-media-during-the-arab-spring/, 2011. human value that is not regarded or celebrated equally across 3. “Twitter, Facebook and YouTube’s Role in Arab Spring (Middle East uprisings) [UPDATED different societies. How can constructive international 10/12/12]”. Social Capital Blog, http://socialcapital.wordpress.com/2011/01/26/twitter- Section 2 facebook-and-youtubes-role-in-tunisia-uprising/, 2012. discussions be started to define a global digital ethos without 4. Tumasjan, A., Sprenger, T.O., Sandner, P.G. et al. “Predicting Elections with Twitter: What 140 further polarizing societies on issues of civil liberties? Characters Reveal about Political Sentiment”. Proceedings of the Fourth International AAAI Conference on Weblogs and Social Media, http://www.aaai.org/ocs/index.php/ICWSM/-- What actions can be taken to promote a new and critical ICWSM10/paper/viewFile/1441/1852, 2010. Asur, S., Huberman, B.A. “Predicting the Future with Social Media”. http://www.hpl.hp.com/ media- or information-literacy among the general public that 5. research/scl/papers/socialmedia/socialmedia.pdf, 2010. raises individuals’ capacities to assess the credibility of 6. Jansen, B.J., Zhang, M., Sobel, K.et al. Twitter Power: Tweets as Electronic Word of Mouth. In information and its sources? Journal of the American Society for Information Science and Technology, 2009, 60(11): 2169-2188.-- Where should different groups of stakeholders look to verify 7. Ratkiewicz, J., Conover, M.D., Meiss, M. et al. “Detecting and Tracking Political Abuse in Social Media”. Proceedings of the Fifth International AAAI Conference on Weblogs and Social Media, the source of information online? How can different markers http://www.aaai.org/ocs/index.php/ICWSM/ICWSM11/paper/view/2850/3274, 2011. of trust and information quality be promulgated to facilitate 8. Berthon, P.R., Pitt, L. F., Plangger, K. et al. Marketing Meets Web 2.0, Social Media, and Creative Consumers: Implications for International Marketing Strategy. In Business Horizons, 2012, 55(3): greater user clarity? Section 3 261-271. 9. Davis, M.M., Spohrer, J.C., Maglio, P.P. Guest Editorial: How Technology is Changing the Design and Delivery of Services. In Operations Management Research, 2011, 4(1):1-5. 10. O’Carroll, L. “Lord McAlpine to Demand Charity Donations for False Twitter Allegations”. TheBox 3: Hyperconnected World Guardian, http://www.guardian.co.uk/media/2012/nov/20/lord-mcalpine-false-twitter- allegations, 2012. 11. Sweney, M. “ITV to Pay Lord McAlpine £125,000 in Damages”. The Guardian, http://www. guardian.co.uk/media/2012/nov/22/itv-pay-lord-mcalpine-125000-damages, 2012.Shaping Culture and Governance in Digital Media 12. “Egypt Newspaper Fights Cartoons with Cartoons”. CBS News, The Associated Press, http:// www.cbsnews.com/8301-202_162-57520830/egypt-newspaper-fights-cartoons-with- cartoons/, 2012.Across the globe, the rules of digital content are being formed: 13. Keller, J. “How Truth and Lies Spread on Twitter”. Bloomberg Business Week, http://www.laws and policies written, cultural norms emerging, industry businessweek.com/articles/2012-10-31/how-truth-and-lies-spread-on-twitter, 2012.coalitions forming. In this dynamic environment, the disparate 14. Rodriguez, O.R. “Mexico Tweets Cause Massive Shootout Panic”. The Huffington Post, http:// www.huffingtonpost.com/2012/09/08/mexico-tweets-panic_n_1866941.html, 2012. Section 4expectations and interests of the primary stakeholder groups 15. Gowing, N. “Skyful of Lies and Black Swans. The New Tyranny of Shifting Information Power in– government, industry, and citizens – are intertwined, and often Crises”, University of Oxford, Reuters Institute for the Study of Journalism, http://reutersinstitute. politics.ox.ac.uk/fileadmin/documents/Publications/Skyful_of_Lies.pdf, 2009.at odds. Any government policy or business strategy will need to 16. Herrman, J. “Twitter Is A Truth Machine”. BuzzFeed, http://www.buzzfeed.com/jwherrman/take into account numerous interlinked factors to achieve twitter-is-a-truth-machine, 2012. 17. Keller, J. “How Truth and Lies Spread on Twitter”. Bloomberg Business Week, http://www.desired outcomes and avoid unintended consequences. businessweek.com/articles/2012-10-31/how-truth-and-lies-spread-on-twitter, 2012. 18. Borger, J. “Israel and Hamas Deploy Twitter Feeds in Media War”. The Guardian, http://www. guardian.co.uk/world/2012/nov/15/israel-hamas-twitter-media-war, 2012.In a series of workshops held in Mexico City, Istanbul, Brussels, 19. Ratkiewicz, J., Conover, M.D., Meiss, M. et al. “Detecting and Tracking Political Abuse in SocialNew York and New Delhi, and supported by a survey on Internet Media”. Proceedings of the Fifth International AAAI Conference on Weblogs and Social Media, http://www.aaai.org/ocs/index.php/ICWSM/ICWSM11/paper/view/2850/3274, 2011.usage in 15 countries conducted in collaboration with comScore 20. Durden, T. “Fake Tweets About Syrian President Assad’s Death Cause All Too Real Spike Inand Oxford University, the project aims to achieve the following Crude And S&P”. ZeroHedge.com, http://www.zerohedge.com/news/supposedly-fake-tweets-over 2012 and 2013: about-syrian-president-assads-death-cause-all-too-real-spike-crude-and-s, 2012. Section 5 21. “Fear Sparks Bangalore Exodus”. The Wall Street Journal, http://online.wsj.com/article/SB100001. Develop an alternative framework to think about issues 872396390443324404577595733604592276.html, 2012. relating to digital media that start with intentions of 22. Biswas, S. “Social Media and the India Exodus”. BBC World News, http://www.bbc.co.uk/news/ world-asia-india-19292572, 2012. stakeholders (e.g. reward innovation and make content 23. Moreno, K. “Social Media Risk Is Like Wildfire. Where’s the Fire Engine?” Forbes, http://www. accessible) rather than the actions taken (e.g. protect forbes.com/sites/forbesinsights/2012/08/07/social-media-risk-is-like-wildfire-wheres-the-fire- engine/, 2012. intellectual property) to arrive at a shared understanding and 24. Fournier, S., Avery, J. The Uninvited Brand. In Business Horizons, 2011, 54(3):193-207. framework concerning issues such as freedom of expression, 25. Reals, T. “Iran News Agency Picks Up “Onion” Story, Tells Iranians Rural Americans Prefer Ahmadinejad to Obama”. CBS News, http://www.cbsnews.com/8301-202_162-57522363/ intellectual property and privacy in the digital universe. iran-news-agency-picks-up-onion-story-tells-iranians-rural-americans-prefer-ahmadinejad-to- obama/, 2012.2. Account for differences in regional values and cultures and 26. Efrati, A., “Google Hit by Weak Results, Shares Dive After Premature Report Shows how they are reflected in the digital world, which is Third-Quarter Profit Sliding 20%”. The Wall Street Journal, http://online.wsj.com/article/SB10000 872396390443684104578064671358259436.html, 2012. Section 6 borderless. 27. Bowcott, O. “Twitter Joke Trial: Paul Chambers Wins High Court Appeal Against Conviction”.3. Explore the context and conditions needed for any The Guardian, http://www.guardian.co.uk/law/2012/jul/27/twitter-joke-trial-high-court, 2012. 28. Waters, R., Thomas, D., Fontanella-Khan, J. “Fears Grow over Efforts to Govern the Web”. The government or business intervention to be effective and Financial Times, http://www.ft.com/intl/cms/s/0/7ff2be2c-3971-11e2-8881-00144feabdc0. sustainable, showcasing some regulatory policies on html#axzz2EwLdUWHr, 2012. 29. Ibid. intellectual property that may have seemed effective in the 30. Nakashima, E. “U.S. Refuses to Back U.N. Treaty, Saying it Endorses Restricting the Internet”. short term but too costly in the long term. The Washington Post, http://www.washingtonpost.com/world/national-security/us-refuses-to- back-un-treaty-saying-it-endorses-restricting-the-internet/2012/12/13/ba497952-4548-11e2-4. Highlight cases of collaborative efforts among stakeholders or 8e70-e1993528222d_story.html, 2012. leadership of a specific group of organizations that can prove 31. Pfanner, E. “U.S. Rejects Telecommunications Treaty”. The New York Times, http://www. nytimes.com/2012/12/14/technology/14iht-treaty14.html?_r=0, 2012. most successful, especially relating to technological 32. Lotan, G. “#Sandy: Social Media Mapping”. Social Flow, http://blog.socialflow.com/ innovation. post/7120245759/sandy-social-media-mapping#, 2012. 33. Streams, K. “LazyTruth Chrome Extension Fact Checks Chain Emails”. The Verge, http://www. theverge.com/2012/11/14/3646294/lazytruth-fact-check-chain-email, 2012.The project is being led by media, entertainment and information 34. “Truthy”. Indiana University, Bloomington, http://truthy.indiana.edu/, 2012.industry partners from the publishing, social media, and 35. “Tease: Trust Enabling Augmented-Reality Support for Information-Environments”. http://www. tease-project.info/, 2012.advertising industries joined by regulatory bodies such as theFederal Communications Commission and the EuropeanCommission. Global Risks 2013 27
  • 28. Section 1 The Dangers of Hubris on Human HealthSection 2 Humanity has always been under constant Challenges to human health never cease to evolve. VaccinesSection 3 and antibiotics have helped us to survive leading causes of threat from infectious disease. Globally, we death from bygone eras, but we face rising rates of chronic are getting better at monitoring signs of a illnesses such as heart disease, cancers and diabetes. Although recent pandemics, such as SARS, avian flu and swine flu, have health-related crisis and alerting each other been contained, they also show how easily deadly viruses can mutate and hop from other species to us.1 For all our – there are far fewer deaths from pandemics successes, we are never far from the edge of catastrophe, as today than a century ago. And modern new biological mutations will eventually overcome a prior human innovation. medicine is consistently meeting newSection 4 diseases with new treatements, as shown While viruses may capture more headlines, arguably the greatest risk of hubris to human health comes in the form of antibiotic- by the progress on HIV since the 1980s. But resistant bacteria. We live in a bacterial world where we will never have such modern medical successes bred be able to stay ahead of the mutation curve. A test of our resilience is how far behind the curve we allow ourselves to fall. a sense of hubris – excessive confidence that science will always come to the rescue? Our survey respondents connected this global risk to others including vulnerability to pandemics, failure of the international Intellectual Property (IP) regime, rising rates of chronic disease and unforeseen consequences of new life science technology.Section 5 Like storm systems colliding in unpredictable ways, the unexpected interactions of these risks could overwhelm our health systems in the coming decade and unpredictably damage our social and economic systems.Section 6 Figure 15: The Dangers of Hubris on Human Health Constellation Failure of intellectual property regime Rising rates of chronic disease Antibiotic-resistant bacteria Unforeseen consequences of new life science technologies Vulnerability to pandemics Source: World Economic Forum 28 Global Risks 2013
  • 29. Section 1Many people take for granted that antibiotics will always be As a consequence, experts are starting to take seriously aavailable when we need them, but soon this may no longer be scenario in which all antibiotics are rendered ineffective forthe case. Every dose of antibiotics gives an advantage for those treating even common infections.small numbers in a bacterial population that are resistant to thedrug. The more a particular antibiotic is used, the more quicklybacteria resistant to that antibiotic will be selected and increasein numbers. Until now, leaders have been able to turn a blind eye Section 2to this problem, as new antibiotics have always emerged toreplace older, increasingly ineffective ones. This is changing.Although several new compounds for fighting bacteria are indevelopment, experts caution that we are decades behind incomparison with the historical rate at which we have discovered A post-antibiotic era means, inand developed new antibiotics. More worryingly, none of the effect, an end to modern medicinedrugs currently in the development pipeline would be effectiveagainst certain killer bacteria, which have newly emerging as we know it. Things as common asresistance to our strongest antibiotics (carbapenems) and fatality strep throat or a child’s scratched Section 3rates of up to 50%.3 As shown by the death of six patients – from18 infected – at the US National Institutes of Health in 2011, knee could once again kill.antibiotic-resistant infections can kill, even at the world’s mostadvanced medical centres.4While predicting the spread of bacteria is notoriously difficult and Dr Margaret Chan,complicated by a general lack of good global data, troubling Director-General, World Health Organization. March 20122projections are emerging in regions where many efforts havebeen made to better monitor the situation. Figure 16 shows themost recent data for two resistant pathogens, as well as thetrends between 2008 and 2011. A well-known antibiotic- Section 4resistant bacteria – meticillin-resistant Staphylococcus aureus,better known as MRSA – is stabilizing and possibly decreasing,but not as sharply as had previously been projected.5 ForK. pneumoniae, there is a widespread increasing trend.ixFigure 16: Percentage of Bloodstream Infections Showing Multi-Drug Resistance, EU/EEA, 2011 and Trends for 2008-2011A. Staphylococcus aureus, resistance to meticillin B. Klebsiella pneumoniae, combined resistance to Section 5(MRSA) three classes of antibiotics (3rd generation cephalo- sporins, fluoroquinolones and aminoglycosides) Percentage Resistance < 1% 1 to < 5% 5 to < 10% 10 to < 25% 25 to < 50% Section 6 ≥ 50% No data reported or less than 10 isolates Not includedThe symbols and indicate a significant increasing or decreasing trend for the period 2008-2011, respectively. These trendswere calculated on laboratories that consistently reported during 2008-2011.Source: European Centre for Disease Prevention and Control, EARS-Net, 2012ix Based on the latest data (published November 2012) from the European Centres for Disease Prevention and Control’s European Antimicrobial Resistance Surveillance Network (EARS-Net) interactive database. http://ecdc.europa.eu/en/activities/ surveillance/EARS-net/database/Pages/database.aspx Global Risks 2013 29
  • 30. Section 1 The Costs of Antibiotic-Resistant Bacteria It is important to remember that antibiotics are not used only to treat infections. They also, by guarding against infection, make possible medical procedures such as heart surgery, organ The spread of antibiotic-resistant bacteria has implications for transplantation, the survival of pre-term babies, and aggressive everyone. The impacts on human health are likely to be highest in immune-modulating therapy for auto-immune diseases such as poorer countries, as the spread of pathogens is facilitated by rheumatoid arthritis, as well as for cancers of the blood, bone poor hygiene, polluted water supplies, overcrowding in urban marrow and lymph nodes. With demographic and lifestyleSection 2 areas, civil conflicts and concentrations of people who are trends such as ageing populations, changes in diet and immuno-compromised due to malnutrition or HIV.6 But even in declining rates of physical activity, we can expect rising rates of the highest-income countries, few people go through life without chronic diseases which are currently treated through surgery needing antibiotics. that would be impossible without effective antibiotics. The numbers of lives now being lost due to antibiotic-resistant On top of destabilizing our health systems, there are profound infections may seem small in comparison to heart disease and cost implications for economic systems and for the stability of cancer – for example, currently just under 100,000 Americans, social systems. The annual cost to the US health care system of 80,000 Chinese and 25,000 Europeans a year die from hospital- antibiotic-resistant infections is already estimated at between acquired antibiotic-resistant infections.7,8,9 However, experts believe US$ 21 billion to US$ 34 billion.11 Elsewhere, losses to GDP haveSection 3 these figures from only a few years ago may be worse today. The already been estimated at 0.4% to 1.6%.12 The consequences of Global Risks report covers a 10-year time horizon, over which a pandemic spread of antibiotic-resistant bacteria could also timescale it is far from unrealistic to project a significant spread of include shortages of food due to untreatable infections in antibiotic-resistant bacteria with high mortality rates.10 livestock, and as leaders seek to slow the spread of pathogens, restrictions on trade in foodstuffs, and even on travel and migration.13 Figure 17 provides a global snapshot of the costs, impacts and burden of antibiotic-resistant bacteria across the globe.Section 4 Figure 17: Spread of Antibiotic-Resistance Bacteria (ARB)x Asia Europe • Thailand: >140,000 ARB • EU: ARB costs society ~ €1.5 bn/yr55 infections/yr and >30,000/yr & 600 million days of lost patients die; 83.6% in productivity productivity.59 losses/yr.49 • Russia: ARB a major concern60 with • Japan: Extensive levels of ARB found 83.6% of families imprudently use in Tokyo’s urban watershed.50 antibiotics at home.61 North AmericaSection 5 • China: Extreme over-prescription of antibiotics51 and rapid growth rate of • USA: ARB causes majority of Middle East ARB.52. 99,000 deaths/yr from infections & North Africa acquired in hospitals.56 • India: Within 4 years (02-06) ARB • Health care costs of ARB are • Egypt: 38% of blood infections went from being resistant to 7, to 21 US$21-34 bn/yr.56 contracted by young cancer patients drugs.53 are from ARB.55 • Vietnam: Farming practices • Israel: ARB found fatal in ~ 50% contributing to spread of ARB cases when resistant to our strongest through environmental antibiotics.63 contamination.54 South America • Pakistan: 71% of infections inSection 6 newborns are from ARB.55 • Peru, Bolivia: >51% of hospital Sub-Saharan Africa infections caused by ARB.57 • Tanzania: Death rate of ARB infected • Brazil: Rates of ARB are up >60%.58 children are double that of malaria.55 • Nigeria: Rapid spread of ARB that came to Africa from Asia.62 Antarctica • ARB found in Antarctic animals & water samples.64 x For more specific and detailed information regarding the simplified key messages outlined in the figure, please consult the referenced papers in the chapter end notes. 30 Global Risks 2013
  • 31. Section 1Why Antibiotics Are Overused access to antibiotics in cases of genuine need. A national task force in India recommended the end of over-the-counter sales of antibiotics, but India’s Health Minister responded with concernIf we want to minimize the rate at which antibiotics become that such a move would effectively deny access to antibiotics toobsolete, we should use them as sparingly as possible. patients in rural areas where there are no physicians to prescribeHowever, a combination of misaligned incentives and lack of the drug.18,19 Inadequate and unreliable access to a full range ofinformation has led antibiotics to be used where they are not antibiotics in low- to middle-income countries is also part of the Section 2truly needed. problem. The spread of resistance in these areas is further facilitated by illicit trade in counterfeit drugs of substandardEven in systems which restrict the use of antibiotics by making quality.them available by prescription only, doctors can come underpressure from patients who mistakenly believe antibiotics kill Meanwhile, antibiotics are over-used around the world inviruses – for example, in a pan-European survey, more than 50% livestock and fish farming (e.g. as growth promoters). Resistantof French respondents expected an antibiotic for an influenza- bacteria can be transferred to humans through contact withlike illness.14 Diagnostic methods that are inadequate to livestock, through the food chain, and through wastewater fromdistinguish bacterial from viral infection or to specify the kind of these operations, as well as wastewater from hospitals andbacterial infection, allied with fear of medical malpractice pharmaceutical plants.20,21 One study found 45 kg of Section 3lawsuits, also mean that doctors tend to prescribe a cocktail of ciprofloxacin (an antibiotic commonly used to treat bladder andwhatever antibiotics are available in the hope that one will be sinus infections) – the equivalent of 45,000 doses – leaking dailyeffective, especially in cases of severe infection. This imprecision from factories into a nearby river.22,23 Environmentalpromotes further spread of resistance in bacteria. contamination like this has led to an antibiotic-resistant bacteria being detected as far afield as Antarctica.24,25Some medical systems incorporate perverse incentives forantibiotics to be overprescribed. In China, for example, drugsales form a significant part of hospitals’ income and, until 2010, Why the Development of New Antibioticsphysicians’ pay was linked to profits from the sale of prescriptiondrugs. One study found that 98% of patients in a Beijing Has Slowedchildren’s hospital were given antibiotics for a common cold.15 Section 4Figures from 2009 suggest that 74% of all hospital admissions in Until recently, as older antibiotics have become less useful dueChina will receive antibiotics to treat their illness or as a to the spread of resistant bacteria, new antibiotics have comepreventive measure.16 along to take their place. But the drug development pipeline for new antibiotics has been drying out. New antibiotics have comeIn many medical systems, antibiotics are not prescription-only. to market in recent years, but any sense of progress thisThey can be purchased over the counter in pharmacies or in provides is false. Our newest antibiotics are the result of scientificlocal marketplaces, and inappropriate self-medication is discoveries that happened decades ago. A timeline of dates offurthering the spread of antibiotic-resistant bacteria. In India, for discovery of distinct classes of antibiotics (as opposed to datesexample, pharmacy sales of strong antibiotics which should be a of market introduction) illustrates that there have been no (as yet)last line of defence increased nearly sixfold from 2005 to 2010.17 successful discoveries of new classes of antibiotics since 1987 Section 5Unfortunately, there is no easy answer to the question of how to (Figure 18).26 There are several competing and overlappingprevent excess use of antibiotics without unfairly restricting explanations why.Figure 18: The Antibiotic Discovery Void27 The discovery dates of distinct classes of antibiotics. No new classes have been discovered since 1987. 1920 1930 1940 1950 1960 1970 1980 1990 1990 2000 2000 2010 2010 Section 6 Discovery Void 2 sp ols 19 5 9 1 6 ms 978 9 87 8 3 orin - 46 19 7 48 50 19 2 53 5 7 -1 1 2 93 alo nic s - 94 96 97 97 97 92 94 s - 194 s - 195 95 95 id 96 96 19 19 -1 ph he an - 1 -1 -1 -1 cta s - 1 -1 -1 -1 -1 -1 ac - 1 - l) - mins - es es ofu es cin in ms s al) cin ins ic im ica no one illin gra lide oc pic tid mid ins itr lin sid pr yc bio my ne Ce | P r top nic pir yx N acyc Fu tho pto ro ep Mo lidin am (to pe sfo vo na ba tre ac Mu Pe s( op s| e rba Rif No in lfo o ide Trim Fo |S M tr tilin Lip rac az Te Su Ca e| Ox mu cit rin Ba uro lym se les am | clo Ple Po zo es os Cy ida sid inc co im |L itro gly es ino |N lon Am es ino ptid Qu pe co GlySource: World Economic Forum, adapted from Silver, L.L. Challenges of Antibacterial Discovery. In Clinical Microbiology Reviews, 2011, 24:71-109. Global Risks 2013 31
  • 32. Section 1 Firstly, drugs to treat chronic illnesses such as diabetes and To address market failure, incentives have been suggested to hypertension increasingly offer a greater potential return on encourage pharmaceutical companies to develop more new investment for pharmaceutical companies. Unlike with antibiotics.35 For example, through advance purchase antibiotics, resistance is not an issue with these drugs. They commitments, governments or philanthropists can promise to have the potential to rapidly achieve wide market penetration, purchase a given amount of a new drug that meets stated whereas any new antibiotic is likely to be kept as a last-resort criteria of effectiveness. This incentivizes private companies to treatment, which will be used only for a few weeks even in that develop new antibiotics, while enabling the sales and marketingSection 2 setting, resulting in low sales for companies.28,xi of those new antibiotics to be restricted in the public interest.xii Interestingly, respondents to the Global Risks Perception Survey Public-private partnerships have also shown promise in connected antibiotic-resistant bacteria to failure of the incentivizing the development of new antibiotics. One example is international intellectual property regime. This global risk is part of the Innovative Medicines Initiative (IMI), a €2 billion defined in the survey as “the loss of the international intellectual initiative of the EU Commission and the European Federation of property regime as an effective system for stimulating innovation Pharmaceutical Industries and Associations, which earmarks and investment” – that is, going beyond the mechanisms of funds for antibiotics discovery and development.36 The IMI acts protecting IP to encompass the idea that the ultimate purpose of as a neutral third party that supports collaborative research the IP system is to stimulate worthwhile innovation. The projects and builds networks between experts from industrySection 3 connection highlights a global market failure to incentivize and academia. front-end investment in antibiotic development through the promise of longer-term commercial reward, a failure which also There is also potential to use public or philanthropic funding to applies to drugs to fight malaria and vaccines for pandemic incentivize academic collaboration with pharmaceutical industry influenza.29 researchers, and more inter-company collaboration as well. Breakthroughs in antibiotic innovation will require pooling and Secondly, regulatory burdens have also impeded development sharing of knowledge among academia, private companies and of new antibiotics.30 Many smaller pharmaceutical companies government regulators.37 Companies and foundations like cannot afford the cost of meeting complex requirements for GlaxoSmithKline (GSK) and the Bill and Melinda Gates clinical trials, and these burdens risk compromising the Foundation are pioneering an “open-lab” approach to research development of many promising new agents.31 which refutes the idea that secrecy and patented monopoliesSection 4 are the bedrock of innovation. GSK has opened its Tres Cantos Thirdly, an increasing amount of effort has been invested in research facilities to outside academic, government and biotech exploring the potential of new life science technologies such as scientists in order to collaborate on finding antibiotics, and the genomics, nano-scale engineering and synthetic biology, Bill and Melinda Gates Foundation has “organized a tuberculosis without yet yielding new approaches in the treatment of bacterial Drug Accelerator program that brings together research teams disease. One unintended consequence of this has been to divert from Abbott Laboratories, AstraZeneca, Bayer, Eli Lilly, researchers’ attention from the traditional approach of GlaxoSmithKline, Merck and Sanofi with scientists from four discovering natural compounds to kill bacteria, which may be academic and government institutions”.38 getting harder.32,33 International efforts would be required to address licensing andSection 5 Hubris on health not only means taking for granted that the regulatory barriers to the development of new antibiotics, such technologies we have will continue to work, but also assuming as lack of clarity and stability within the regulatory framework that bigger and better scientific breakthroughs are just around and lack of harmonization in processes of clinical trials between the corner. There is no guarantee that putative alternatives to countries.39 antibiotics will be developed before existing antibiotics become ineffective. Similarly, international collaboration would be required to facilitate improvements in data gathering, to enable more accurate and continuous monitoring of the global spread of What Can Be Done? antibiotic-resistant bacteria.40 Experience from Europe over the past decade shows that if data on antibiotic use and resistance Numerous reports, workshops and conferences have proposedSection 6 is publicly available, and national coordinated policies on policies and strategies to address the spread of antibiotic- prevention and control of antibiotic-resistant bacteria are resistant bacteria. The World Health Organization (WHO) implemented and enforced, significant reduction in antibiotic use launched a global strategy for containment of antimicrobial can be achieved in human medicine.41 resistance in 2001.34 However, a hubristic assumption that the medical industry would continue to find solutions has contributed to decision-makers regarding the issue as a relatively low priority. The challenge is complicated by the fact that antibiotic-resistant bacteria do not respect borders, so there are limits on what can be done without strong international and multistakeholder collaboration. An effective response to the pandemic spread of antibiotic-resistant bacteria would involve xi For the time being, priorities for R&D into new drugs are still guided by potential returns on investments and R&D of drugs that will make peak annual worldwide sales of several billion tackling failures of both markets and global governance. US dollars (e.g. for treating chronic diseases). These are preferred to new antibiotics that will make peak annual worldwide sales of US$ 500 million to US$ 1 billion, as exemplified in recent years by the sales of antibiotics like linezolid or daptomycin. These sales levels would have been considered acceptable 15 years ago when a “blockbuster” was defined as a drug making peak sales of US$ 1 billion or more annually. In 1997, the most-sold drug (overall) had sales of US$ 3.6 billion and 28 drugs had sales of US$ 1 billion or above (therefore considered a “blockbuster”). The most sold licensed antibiotic ranked ninth place with sales of US$ 1.5 billion. In 2011, the most sold drug had sales of US$ 10.7 billion, and 119 drugs had sales of US$ 1 billion or above. The most-sold licensed antibiotic ranked 28 with sales of US$ 1.4 billion. (Based on expert interviews) xii For an overview of mechanisms to incentivize pharmaceutical R&D see Morel, C.M. and E. Mossialos. Stocking the Antibiotic Pipeline. In BMJ, 2010, 340.48 32 Global Risks 2013
  • 33. Section 1More efforts, however, will be needed to slow the use of The late Nobel Laureate Elinor Ostrom has compared the issueantibiotics in agriculture, aquaculture and animal husbandry. of antibiotic-resistant bacteria to that of climate change, “in theResearch is needed to understand how Nordic countries have sense that both phenomena involve non-renewable globalmade significant progress – part of the answer may be small resources, both are caused by human activity and areherd sizes – and to assess what works in awareness-raising intrinsically linked to our behaviour. The problem can only becampaigns, such as the Pew Charitable Trusts Campaign on addressed through international cooperation”.65 A cause forHuman Health and Industrial Farming.xiii Figure 19 shows that the optimism is that, unlike with climate change, we know what Section 2amounts of antibiotics used to raise animals for food-production actions are required. The challenge is to create the will andis still high, even in highly regulated markets like Europe.42 mechanisms to take them.45As new antibiotics become available, international collaborationwill be required to limit their use to cases of need. This implies Questions for Stakeholdersconsidering access to antibiotics as a development aid issue for -- How can the threat of antibiotic-resistant bacteria below- to middle-income countries, and finding international addressed, considering that it crosses both national andmechanisms to promote collaboration on governance issues. species borders? How can we build visibility and politicalThere are opportunities to learn from each others’ experience in momentum to the levels currently surrounding climate changecontrolling antibiotic use through aligning financial incentives in and pandemics? Section 3the health system to tackle over-prescription, througheducational interventions to tackle the problem of unnecessary -- How do we re-establish antibiotic discovery, research andself-medication, and through improving technologies to development given the higher return on investment on R&D ofdiagnose the existence and nature of bacterial infectionsxiv and drugs for chronic diseases? What incentives are feasible?antibiotic stewardship.44 What can facilitate the work of academia and small and medium enterprises on antibiotics?Figure 19: Sales of Antibiotics for Food-Producing Animals43 -- How do we preserve current antibiotics until new agents are available? How can we align incentives to tackle overuse of Sales of antibiotics for food-producing animals, including horses, antibiotics in farming of livestock and fish? What incentives in milligrams of antibiotics per population correction unit work best in health financing systems? How can the (PCU, i.e. 1 kilogram of animal), 2010 international organizations be supported to take on a global Section 4 300 leadership role to preserve the utility of current antibiotics? Others* Pleuromutilins Polymyxins 250 Aminoglycosides Fluoroquinolones Lincosamides 200 Macrolides Trimethoprim Section 5milligrams/PCU Sulfonamides 150 Penicillins Tetracyclines 100 50 Section 6 0 Belgium Czech Republic Finland France Iceland Ireland Netherlands Portugal Spain Sweden United Kingdom Austria Estonia Latvia Lithuania Slovenia Hungary Norway DenmarkSource: Adapted from Sales of Veterinary Antimicrobial Agents in 19 EU/EEA Countries in 2010.2012. European Medicines Agency.xiii Like campaigns such as ReAct-Action on Antibiotic Resistance, Antibiotic Action, and the World Alliance against Antibiotic Resistance (WAAR), the Pew Campaign on Human Health and Industrial Farming is working to preserve the effectiveness of antibiotics by raising awareness and shaping international policies in all sectors. Their websites are rich in content and information resources.xiv Molecular diagnostic technology available today can diagnose bacterial infections and the sensitivity of the bacteria to various antibiotics in a very cost-effective fashion. These technologies need to be scaled to allow for more efficient and appropriate treatment and antibiotic usage in health systems in high-, middle- and low-income economies. Global Risks 2013 33
  • 34. Section 1 Box 4: Bringing Space Down to Earth -- Land and waterway use mismanagement: Governments have started to use satellite images in near real-time to monitor Damage to space-based infrastructure is one of the more activities such as forest clearing in the Amazon rainforest and esoteric global risks on which our experts are surveyed annually. to identify illegal logging. Members of the World Economic Forum’s Global Agenda -- Diffusion of weapons of mass destruction and Failure of Council on Space Security believe that lack of broad awareness diplomatic conflict resolution: Satellites play a critical role in the of the importance of satellites explains why this risk consistently control of weapons of mass destruction by monitoring disarma-Section 2 ranks at the bottom of the global risk landscape. Few people ment agreements. They can provide irreplaceable means for appreciate how much we depend on satellites to support our improving transparency and measures for building confidence. most critical infrastructure and to live modern and mobile lives: -- The daily operations of telephony and Internet networks, Through their ability to see and speak to all corners of the world, financial markets, the banking industry, data centres and land, air and sea, satellites are enablers that strengthen our energy networks all rely on precise timing information resilience to a wide range of global risks. Broader awareness of conveyed by satellite. this fact is needed to ensure that our critical space-based infrastructure is managed sustainably and that we do not -- The €300 billion global TV industry would not be possible underestimate the potential impacts if these critical systems fail. without satellites.46 Nor would accurate weather predictions, estimated to equal €60 billion in socio-economic benefits aSection 3 Figure 20: Looking Deeper into Sea Ice year in the EU alone.47 -- Rescuers in emergency situations depend on satellites for communication, when mobile networks are overloaded. Peacekeeping and military missions also rely on secure satellite communications. Satellites are at risk of three main “black swan” events which are captured in our global risk landscape: being targeted in a conflict between states; a strong geomagnetic storm; and collisions with space debris. These low-likelihood but high-impact risks are,Section 4 however, not those that keep satellite operators awake at night. They worry far more about near-term risks on Earth. As society becomes increasingly dependent on invisible signals from space, the unforeseen long-term consequences of shortsighted management of the spectrum – the term for radio waves which satellites use to communicate – threaten essential satellite Source: “ESA satellites looking deeper into sea ice”. European Space Agency (ESA), http:// services. The desire to share scarce spectrum resources to spaceinimages.esa.int/Images/2012/10/ESA_satellites_looking_deeper_into_sea_ice, 2012 deliver new-age digital services is taking regulators by storm, while invisible yet crucial services are squeezed into silence. These global risks are not only physical risks to satellites but alsoSection 5 are risks which would greatly weaken our ability to respond and prevent some of the most likely and high-impact global risks in the landscape. -- Rising greenhouse gas emissions and Climate Change Adaptation: Satellite imaging, data and communications can be used to provide early warning systems for extreme weather events and to monitor floods, desertification, and rising sea levels and temperatures in real time. -- Food and water crises: Satellite imagery allows food supplies to be tracked and the availability and quality of arable landSection 6 and potable water resources to be assessed, as well as the locations and density of the populations that rely on them. Satellite communications allow effective and secure food distribution, as well as tracking for the personal safety of aid workers who distribute it. -- Severe income disparity: Connecting the world via satellite broadband has fundamental and far-reaching effects on individual lives, whether by enabling universal primary education in the most remote areas, bringing healthcare and telemedicine to those who might otherwise die because their homes are too far away from healthcare facilities, or making critical solutions such as micro-finance possible in areas where no other communications infrastructure exists. -- Critical Systems Failure: With virtually every network infrastructure using satellite for its timing reference – whether telephony, Internet, financial markets or banking, from data centres to energy networks – risks to satellite infrastructure could result in a global communications meltdown. 34 Global Risks 2013
  • 35. Section 1References 40. “Burden of Antibiotic Resistance”. Action on Antibiotic Resistance (ReAct), http://www. reactgroup.org/uploads/publications/react-publications/ReAct-facts-burden-of-antibiotic- resistance-May-2012.pdf, 2012.1. Imai, M., Watanabe, T., Hatta, M., et al. Experimental Adaptation of an Influenza H5 HA Confers 41. Crimmins, E.M. & Beltrán-Sánchez,H. Mortality and Morbidity Trends: Is There Compression of Respiratory Droplet Transmission to a Reassortant H5 HA/H1N1 Virus in Ferrets. In Nature, Morbidity? In The Journals of Gerontology Series B: Psychological Sciences and Social 2012, 486:420-428. Sciences, 2011, 66B :75-86.2. Chan, M. “Antimicrobial Resistance in the European Union and the World”. World Health 42. Sales of Veterinary Antimicrobial Agents in 19 EU/EEA Countries in 2010. 2012. European Organization, http://www.who.int/dg/speeches/2012/amr_20120314/en/index.html, 2012. Medicines Agency.3. Borer, A., Lisa Saidel-Odes, M. D., Riesenberg, K., et al. 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Spellberg, B., Blaser, M., Guidos, R. J., et al. Combating Antimicrobial Resistance: Policy from China, Kuwait and the United States. In Globalization and Health, 2006, 2(1):6. Recommendations to Save Lives. In Clinical Infectious Diseases: an Official Publication of the 53. Bhattacharya, D., Sugunan, AP, Bhattacharjee, H. et al. Antimicrobial Resistance in Infectious Diseases Society of America, 2011, 52:S397-428. Shigella-Rapid Increase & Widening of Spectrum in Andaman Islands, India. In The Indian12. Smith, R. D., Yago, M., Millar, M., et al. Assessing the Macroeconomic Impact of a Healthcare Journal of Medical Research, 2012, 135(3):365. Problem: The Application of Computable General Equilibrium Analysis to Antimicrobial 54. Hoa, P.T.P., Managaki, S., Nakada, N. et al. Antibiotic Contamination and Occurrence of Resistance. In Journal of Health Economics, 2005, 24:1055-75. Antibiotic-Resistant Bacteria in Aquatic Environments of Northern Vietnam. In Science of the13. Crimmins, E.M. & Beltrán-Sánchez, H. Mortality and Morbidity Trends: Is There Compression of Total Environment, 2011, 409(15):2894-2901. Morbidity? In The Journals of Gerontology Series B: Psychological Sciences and Social 55. “Burden of Antibiotic Resistance”. Action on Antibiotic Resistance (ReAct), http://www. Sciences, 2011, 66B:75-86. reactgroup.org/uploads/publications/react-publications/ReAct-facts-burden-of-antibiotic-14. Carlet, J., Jarlier, V., Harbarth, S., et al. Ready for a World Without Antibiotics? The Pensieres resistance-May-2012.pdf, 2012. Antibiotic Resistance Call to Action. In Antimicrobial Resistance and Infection Control, 2012, 1:11. 56. Spellberg, B., Blaser, M., Guidos, R. J., et al. Combating Antimicrobial Resistance: Policy Section 415. Yezli, S. & Li, H. Antibiotic Resistance amongst Healthcare-associated Pathogens in China. In Recommendations to Save Lives. In Clinical Infectious Diseases: an Official Publication of the International Journal of Antimicrobial Agents, 2012, 40:389-397. Infectious Diseases Society of America, 2011, 52:S397-428.16. Wei, D. “Abuse of Antibiotics 80,000 Deaths Each Year”. China Youth Daily, http://zqb.cyol.com/ 57. “Antimicrobial Resistance” Fact Sheet 194. World Health Organization, http://www.who.int/ content/2009-01/12/content_2504156.htm, 2009. mediacentre/factsheets/fs194/en/, 2012.17. Westly, E. India Moves to Tackle Antibiotic Resistance. In Nature, 2012, 489:192. 58. Rossi, F. The Challenges of Antimicrobial Resistance in Brazil. In Clinical Infectious Diseases,18. Crimmins, E.M. & Beltrán-Sánchez, H. Mortality and Morbidity Trends: Is There Compression of 2011, 52(9):1138-1143. Morbidity? In The Journals of Gerontology Series B: Psychological Sciences and Social 59. White, A.R. Effective Antibacterials: at What Cost? The Economics of Antibacterial Resistance Sciences, 2011, 66B:75-86. and its Control. In Journal of Antimicrobial Chemotherapy, 2011, 66(9):1948-53.19. Westly, E. India Moves to Tackle Antibiotic Resistance. In Nature, 2012, 489:192. 60. Frigo, N., Unemo, M., Kubanova, A. et al. P1-S1.42 Russian Gonococcal Antimicrobial20. Crimmins, E.M. & Beltrán-Sánchez, H. Mortality and Morbidity Trends: Is There Compression of Susceptibility Programme (RU-GASP) - Resistance Levels in 2010 and Trends during Morbidity? In The Journals of Gerontology Series B: Psychological Sciences and Social 2005–2010. In Sexually Transmitted Infections, 2011, 87(Suppl 1):A116-A117. Sciences, 2011, 66B:75-86. 61. Stratchounski, L.S., Andreeva, I. V., Ratchina, S. A.et al. The Inventory of Antibiotics in Russian21. Carlet, J., Jarlier, V., Harbarth, S., et al. Ready for a World Without Antibiotics? The Pensieres Home Medicine Cabinets. In Clinical Infectious Diseases, 2003, 37(4):498-505. Antibiotic Resistance Call to Action. In Antimicrobial Resistance and Infection Control, 2012, 1:11. 62. Ogbolu, D.O., Daini, O.A., Ogunledun, A. et al. High Levels of Multidrug Resistance in Clinical22. Laxminarayan, R. & Heymann, D.L. Challenges of Drug Resistance in the Developing World. In Isolates of Gram-Negative Pathogens from Nigeria. In International Journal of Antimicrobial Section 5 BMJ: British Medical Journal, 2012, 344. Agents, 2011, 37(1): 62-66.23. Joakim Larsson, D.G. & Fick, J. Transparency throughout the Production Chain—a Way to 63. Borer, A., Saidel - Odes, L., Riesenberg, K., et al. Attributable Mortality Rate for Carbapenem- Reduce Pollution from the Manufacturing of Pharmaceuticals? In Regulatory Toxicology and resistant Klebsiella Pneumoniae Bacteremia. In Infection Control and Hospital Epidemiology, Pharmacology, 2009, 53:161-163. 2009, 30:972-6.24. Sjölund, M., Bonnedahl, J., Hernandez, J., et al. Dissemination of Multidrug-Resistant Bacteria 64. Hernández, J., Stedt, J., Bonnedahl, J., et al. Human-associated Extended-spectrum into the Arctic. In Emerging Infectious Diseases, 2008, 14:70-2. Beta-lactamase in the Antarctic. In Applied and Environmental Microbiology, 2012, 78:2056-8.25. Hernández, J., Stedt, J., Bonnedahl, J., et al. Human-associated Extended-spectrum 65. Cars, O., A. Hedin, and A. Heddini, The Global Need for Effective Antibiotics-Moving towards Beta-lactamase in the Antarctic. In Applied and Environmental Microbiology, 2012, 78:2056-8. Concerted Action. Drug Resist Updat, 2011, 14(2):p. 68-9.26. Silver, L.L. Challenges of Antibacterial Discovery. In Clinical Microbiology Reviews, 2011, 24:71-109.27. Ibid.28. Carlet, J., Jarlier, V., Harbarth, S., et al. Ready for a World Without Antibiotics? The Pensieres Antibiotic Resistance Call to Action. In Antimicrobial Resistance and Infection Control, 2012, 1:11.29. Chan, M. “Strengthening Multilateral Cooperation on Intellectual Property and Public Health”. World Health Organization, http://www.who.int/dg/speeches/2009/intellectual_ Section 6 property_20090714/en/index.html, 2009.30. Appelbaum, P.C. 2012 and Beyond: Potential for the Start of a Second Pre-antibiotic Era? In Journal of Antimicrobial Chemotherapy, 2012, 67:2062-8.31. Piddock, L.J.V. The Crisis of No New Antibiotics—What is the Way Forward? In The Lancet Infectious Diseases, 2012, 12:249-253.32. Ibid.33. Silver, L.L. Challenges of Antibacterial Discovery. In Clinical Microbiology Reviews, 2011, 24:71-109.34. “WHO Global Strategy for Containment of Antimicrobial Resistance”. World Health Organization, http://www.who.int/drugresistance/WHO_Global_Strategy.htm/en/index.html, 2001.35. Piddock, L.J.V. The Crisis of No New Antibiotics—What is the Way Forward? In The Lancet Infectious Diseases, 2012, 12:249-253.36. Chan, M. “Antimicrobial Resistance in the European Union and the World”. World Health Organization, http://www.who.int/dg/speeches/2012/amr_20120314/en/index.html, 2012.37. Crimmins, E.M. & Beltrán-Sánchez, H. Mortality and Morbidity Trends: Is There Compression of Morbidity? In The Journals of Gerontology Series B: Psychological Sciences and Social Sciences, 2011, 66B:75-86.38. Nathan, C.F. “Let’s Gang Up on Killer Bugs”. The New York Times, http://www.nytimes. com/2012/12/10/opinion/teaming-up-to-make-new-antibiotics.html, 2012.39. Piddock, L.J.V. The Crisis of No New Antibiotics—What is the Way Forward? In The Lancet Infectious Diseases, 2012, 12:249-253. Global Risks 2013 35
  • 36. Section 1 Special Report: Building National ResilienceSection 2 to Global Risks Global risks would meet with global As global risks can be expressed in many countries at the sameSection 3 time, they can spread through countries that share borders, responses in an ideal world, but the reality is have similar fundamentals or depend on the same critical that countries and their communities are on systems. This special report is a pioneering effort “resilience” to diagnostic framework that applies the concept of to construct a the frontline when it comes to systemic assess national preparedness for global risks. shocks and catastrophic events. In an The proposed resilience framework would function as the “MRI” for increasingly interdependent and national decision-makers to reveal underlying weaknesses in global hyperconnected world, one nation’s failure to risk readiness that mayIt is a prototype featuring potential qualitative assessment methods. not be apparent via more traditional risk xvSection 4 address a global risk can have a ripple effect and quantitative indicators produced by the World Economic Forum and by other research institutions. The aim is to refine and improve on others. Resilience to global risks – this framework by soliciting feedback from readers of this Special incorporating the ability to withstand, adapt Report and then to introduce an interim finding that provides more detail on national resilience to global risks during summer 2013. and recover from shocks – is, therefore, becoming more critical. This special report is Types of Risk organized around two axioms: To assess and evaluate a nation’s resilience to global risks - Global risks are expressed at the national requires defining such risks in their most appropriate organiza-Section 5 tional context. Although this report does not differentiate be- level. tween the views of a public or private sector organization, it does underscore the importance of understanding the qualitative - No country alone can prevent their distinctions among the types of risks that organizations face.1 occurrence. Harvard Business School Professors Robert Kaplan and Annette Mikes distinguish three types of risks: 1. Preventable Risks, such as breakdowns in processes and human error 2. Strategic Risks, which are undertaken voluntarily after weighing them against the potential rewardsSection 6 3. External Risks, which are beyond one’s capacity to influence or control In the case of business, Kaplan and Mikes suggest that the first two types can be approached through traditional risk manage- ment methods, focusing mostly on organizational culture and strict compliance with regulatory, industry or institutional direc- tives. Given the exogenous nature of external risks, cultivating resilience is the preferred approach for this last type of risk.2 Another way of categorizing risk is to ask two questions: How predictable is its likelihood and potential impact, and how much do we know about how to deal with it? If we can predict it and we know a lot about it, we can come up with specific strategies to anticipate the risk, mitigate its effects and minimize losses. As Figure 21 shows, resilience is most important for risks that are difficult to predict and/or where there is little knowledge on how to handle such risks.3 xv In this report, qualitative data refers to perception surveys. 36 Global Risks 2013
  • 37. Section 1Figure 21: Resilience is Most Applicable to Unpredictable Systems ThinkingRisks with Little Knowledge About Effective Measures Resilience applies to different entities, ranging from communities to Emphasize resilience Use anticipatory countries, but the critical point is to avoid examining any of them in High over anticipatory strategies isolation.6 We need to think of a country as a system that isPredictability of Risk strategies comprised of smaller systems and a part of larger systems. A country’s resilience is affected by the resilience of those smaller and Section 2 Strengthen Emphasize resilience larger systems.7 Low resilience over anticipatory strategies What makes a system resilient?xx Unlike an object, such as the Small Large aforementioned bridge, systems are too complex for mathematical Amount of knowledge of a risk and effective measures to deal with it calculations to predict the stresses that might arise.8 Systems thinking provide a foundation to assess resilience throughSource: Adapted from Comfort, L. K., Boin, A., & Demchak, C. C. The Rise of Resilience, in DesigningResilience: Preparing for extreme events. Pittsburg: University of Pittsburgh Press, 2010. considering such components as the system’s robustness, redundancy, resourcefulness, response and/or recovery, all of whichThe majority of the 50 global risks, viewed with a 10 year time are defined in the following section.9horizon, that feature annually in the World Economic Forum’s Global Section 3Risks report fall under this categorization of risks. The 50 includerisks which could manifest either suddenly or through gradual shifts. National Resilience: Five Subsystems andAlthough they are known risks, mapped and monitored by theForum’s Risk Response Network, there are varying degrees of Five Componentsuncertainty regarding how and when they might manifest, especially This diagnostic tool is intended to measure the resilience of a countryin this interconnected world, and regarding what primary and to global risks by treating it as a system composed of subsystems.xxisecondary consequences they would have for countries. Several methods already exist to measure the resilience of such subsystems, mostly as they relate to the economy or ecosystem.xxii But what makes an economic system resilient is different from whatResilience: A Working Definition makes an ecological system resilient (not only are the threats and Section 4 risks different, but so are the interconnections with other systems).In the wake of unprecedented disasters in recent years, “resilience” The aim of this report, therefore, is to present a prototype frameworkhas become a popular buzzword across a wide range of disciplines, to measure a country’s overall resilience via a five-part initialwith each discipline attributing its own working definition to the term. framework, depicted in Figure 23. This framework considers theA definition that has long been used in engineering4 is that resilience country as comprised of fivexxiii core subsystems:xxivis the capacity for “bouncing back faster after stress, enduringgreater stresses, and being disturbed less by a given amount of 1. Economic subsystem: includes aspects such as thestress”.xvi This definition is commonly applied to objects, such as macroeconomic environment, goods and services market,bridges or skyscrapers. However, most global risks are systemic in financial market, labour market, sustainability andnature,xvii and a system – unlike an object – may show resilience not productivity.10 Section 5by returning exactly to its previous state, but instead by finding 2. Environmental subsystem: includes aspects such asdifferent ways to carry out essential functions; that is, by adapting.5 natural resources, urbanization and the ecological system.For a system, an additional definition of resilience is “maintaining 3. Governance subsystem: includes aspects such assystem functionxviii in the event of disturbance” (see Figure 22). institutions, government, leadership, policies and the rule of law.The working definition of a resilient country for this report is, therefore, 4. Infrastructure subsystem: includes aspects such as criticalone that has the capability to 1) adapt to changing contexts, 2) infrastructure (namely communications, energy, transport,withstand sudden shocks and 3) recover to a desired equilibrium, water and health).11either the previous one or a new one, while preserving the continuity ofits operations.xix The three elements in this definition encompass both 5. Social subsystem: includes aspects such as human capital,recoverability (the capacity for speedy recovery after a crisis) and health, the community and the individual. Section 6adaptability (timely adaptation in response to a changing environment). xvi “Stress” can imply either chronic difficulty or an acute crisis. xvii Systemic means “relating to a system,” especially as opposed to a particular part.Figure 22: Resilient Systems xviii This refers to the ability of a system to continue to meet its core functions. xix The current definition of resilience is a working definition.Resilience is... xx “Systems thinking” in this context focuses on the design of systems, the flexibility and adaptability of systems to be redesigned and their ability to redesign themselves organically in the face of a crisis. xxi Many indices and studies break their topic, issue or subject into systems (terminology differs and words such as categories, dimensions, environments or spheres have been used interchangeably). …Bouncing back …Maintaining …The ability For example: Sustainability, resilience and resource efficiency study by the Environment and Develop- ment Division, UNESCAP; the Global Political Risk Index by Eurasia Group; the Failed States Index by faster after stress, system function to withstand, The Fund of Peace; Understanding community resilience and program factors that strengthen them by the International Federation of Red Cross and Red Crescent Societies; the Sustainability Index by enduring greater in the event recover from, Zurich Cantonal Bank; Wealth of Nations Triangle Index by Money Matters Institute; and World stresses, and of a disturbance… and reorganize xxii Competitiveness Scoreboard by the International Institute for Management Development. Risk Management Index by Inter-American Development Bank assesses risk management being disturbed in response to performance; Prevalent Vulnerability Index by Inter-American Development Bank estimates less by a given crises... countries’ predominant vulnerability conditions through three broad categories: (i) exposure and susceptibility; (ii) socio-economic fragility inequality; (iii) lack of social resilience; Economic Resilience amount of stress… Index by Commonwealth Secretariat/University of Malta measures countries’ resilience through four key indicators (i) macroeconomic stability; (ii) microeconomic market efficiency; (iii) governance; (iv) social development; Composite Vulnerability Index by Commonwealth Secretariat measures the vulnerability of countries through three key components (i) lack of expert diversification; (ii) export For an Object For a System For an Adaptive dependence; (iii) impact on natural disasters; and Environmental Sustainability Index by Yale University/ Columbia University measures the ability of countries to protect the environment through System five core components: (i) environmental systems; (ii) environmental stresses; (iii) human vulnerability to environmental stresses; (iv) social and institutional capacity; (v) global stewardship.Source: Adapted from Martin-Breen, P. & Anderies, J.M. “Resilience: A Literature Review”. xxiii Many aspects of competitiveness are taken into account in the five core subsystems.Rockefeller Foundation, http://www.rockefellerfoundation.org/news/publications/resilience- xxiv During 2013, workshops and expert calls will be conducted to define, verify and validateliterature-review, 2011. the five core subsystems in this framework. Global Risks 2013 37
  • 38. Section 1 Figure 23: National Resilience Beta Framework Macro System Country Subsystems Economic Environmental Governance Infrastructure SocialSection 2 Robustness Robustness Robustness Robustness Robustness Components of Resilience Resilience Redundancy Redundancy Redundancy Redundancy Redundancy Characteristics Resourcefulness Resourcefulness Resourcefulness Resourcefulness Resourcefulness Resilience China economic Response Response Response Response ResponseSection 3 Performance hard landing Recovery Recovery Recovery Recovery Recovery Source: World Economic Forum As depicted in Figure 23, each of the five subsystems is assessed Resilience Characteristics (Robustness, Redundancy and further using five components of resilience: 1) robustness, 2) Resourcefulness) redundancy, 3) resourcefulness, 4) response and 5) recovery.xxv The following three components of resilience are used to describe a These five components can be categorized further into two types:Section 4 country’s state of resilience. These components should be designed resilience characteristics (robustness, redundancy and into a system and, as such, will enable assessments of a country’s resourcefulness) and resilience performance (response and inherent resilience capabilities.12 Relevant perception data and recovery). The measurement of these components presents a potential hard data for the three resilience characteristics are significant research challenge, as there are many attributes available in Appendix 3. underpinning each of them, and these attributes are overlapping and complementary (Appendix 3 identifies potential qualitative and A. Robustness quantitative indicatorsxxvi). Robustness incorporates the concept of reliability and refers to the This report has adopted one approach from the World Economic ability to absorb and withstand disturbances and crises.13 The Forum’s annual Global Competitiveness Report (GCR), which assumptions underlying this component of resilience are that: 1) ifSection 5 measures the microeconomic and macroeconomic foundations of fail-safes and firewalls are designed into a nation’s critical national competitiveness.xxvii Similar to the concept of national networks,xxx and 2) if that nation’s decision-making chains of resilience, the measurement of national competitiveness uses data command become more modular in response to changing from both international sources as well as from the Forum’s annual circumstances, then potential damage to one part of a country is Executive Opinion Survey (EOS) to capture concepts that require a less likely to spread far and wide. more qualitative assessment, or for which internationally comparable statistical data are not readily available. For the purposes of this Example of Attributes inaugural effort, we started the analysis by using data from EOS to -- Monitoring system health: Regularly monitoring and assess components of national resilience.xxviii assessing the quality of the subsystem ensures its reliability. -- Modularity: Mechanisms designed to prevent unexpectedSection 6 Since 2011, the Global Competitiveness Report has included a shocks in one part of a system from spreading to other parts prototype Sustainability-Adjusted Global Competitiveness Index of a system can localize their impact, as happened with the (GCI).xxix This not only measures the propensity to prosper and grow contagion from investment banking to retail banking during but also integrates the idea of “quality growth”, taking into account the 2007-2008 financial crisis. environmental stewardship and social sustainability. The quality of -- Adaptive decision-making models: Networked managerial growth is an important aspect for resilience, and this will be structures can allow an organization to become more or less addressed as we develop the framework further. centralized depending on circumstances, such as when branch offices of the Japanese retailer Lawson’s continued operating through the serious disruptions of the Great East Japan Earthquake in 2011.14 These measures can include xxv having in place the right investment and incentive structures During 2013, workshops and expert calls will be conducted to define, verify and validate the five components of resilience in this framework. to overcome competing interests. xxvi Indicators proposed are examples of currently available indices and indicators. xxvii Since 2005, the World Economic Forum has based its competitiveness analysis on the Global Competitiveness Index (GCI), a comprehensive tool that measures the microeconomic and macroeconomic foundations of national competitiveness (defined as the set of institutions, policies and factors that determine the level of productivity of a country). The GCR aims to provide insight and stimulate discussion among all stakeholders on the best strategies and policies to help countries to overcome the obstacles to improving competitiveness. xxviii The Global Competitiveness Report observed that the more competitive an economy is, the more able it is to weather an economic crisis. xxx Critical networks are not limited to ICT but included critical social, political, ecological and xxix For more information, please see http://www.weforum.org/sustainablecompetitiveness. economic networks. 38 Global Risks 2013
  • 39. Section 1B. Redundancy D. ResponseRedundancy involves having excess capacity and back-up Response means the ability to mobilize quickly in the face ofsystems, which enable the maintenance of core functionality crises.20 This component of resilience assesses whether ain the event of disturbances.15 This component assumes that a nation has good methods for gathering relevant informationcountry will be less likely to experience a collapse in the wake from all parts of society and communicating the relevant dataof stresses or failures of some of its infrastructure, if the design and information to others, as well as the ability for decision-of that country’s critical infrastructure and institutions makers to recognize emerging issues quickly. Section 2incorporates a diversity of overlapping methods, policies,strategies or services to accomplish objects and fulfil Example of Attributespurposes. -- Communication: Effective communication and trust in the information conveyed increase the likelihood that, in theExamples of Attributes event of a crisis, stakeholders are able to disseminate and-- Redundancy of critical infrastructure: Designing replication share information quickly, and to ensure cooperation and of modules which are not strictly necessary to maintaining quick response from the audience. core function day to day, but are necessary to maintaining -- Inclusive participation: Inclusive participation among public core function in the event of crises. sector, private sector and civil society stakeholders can Section 3-- Diversity of solutions and strategy: Promoting diversity of build a shared understanding of the issues underpinning mechanisms for a given function. Balancing diversity with global risks in local contexts, reduce the possibility of efficiency and redundancy will enable communities and important interdependencies being overlooked,21 and countries to cope and adapt better than those that have strengthen trust among participants.22 none. E. RecoveryC. Resourcefulness Recovery means the ability to regain a degree of normalityResourcefulness means the ability to adapt to crises, respond after a crisis or event, including the ability of a system to beflexibly and – when possible – transform a negative impact into flexible and adaptable and to evolve to deal with the new ora positive.16 For a system to be adaptive means that it has changed circumstances after the manifestation of a risk.23,xxxi Section 4inherent flexibility, which is crucial to enabling the ability to This component of resilience assesses the nation’s capacitiesinfluence of resilience.17 The assumption underlying this and strategies for feeding information into public policies andcomponent of resilience is that if industries and communities business strategies, and the ability for decision-makers to takecan build trust within their networks and are able to self- action to adapt to changing circumstances.organize, then they are more likely to spontaneously react anddiscover solutions to resolve unanticipated challenges when Example of Attributeslarger country-level institutions and governance systems are -- Active “horizon scanning”: Critical to this attribute arechallenged or fail. multistakeholder processes tasked with uncovering gaps in existing knowledge and commissioning research to fillExample of Attributes those gaps.24, xxxii-- Capacity for self-organization18: This includes factors such Section 5 -- Responsive regulatory feedback mechanisms: Systems to as the extent of social and human capital, the relationship translate new information from horizon-scanning activities between social networks and state, and the existence of into action – for example, defining “automatic policy institutions that enable face-to-face networking. These adjustments triggers” – can clarify circumstances in which factors are critical in circumstances such as failures of policies must be reassessed.25 government institutions when communities need to self-organize and continue to deliver essential public As an example of the overlapping and complementary nature services. of these attributes, inclusive participation is listed as a key-- Creativity and innovation: In countries and industries, the attribute of response, but it is also vital in other areas such as ability to innovate is linked to the availability of spare recovery and resourcefulness. Also inherent in all resilience resources and the rigidity of boundaries between characteristics, though referenced above only in the attribute Section 6 disciplines, organizations and social groups.19 of adaptive decision-making models, are investment and incentive structures and design requirements to overcomeResilience Performance (Response and Recovery) collective action problems and competing interests. There areThese two components of resilience describe how a system many individual stakeholders who would benefit from greaterperforms in the event of crises. Response and recovery are shared resilience but currently lack either the incentive or feeldependent on risk, event and time. These components will too pressed for time and resources to take the necessaryprovide us with the ability to compare systems and feed the actions.measurements and results to calibrate the resiliencecharacteristics. As we are dealing with global risks, the abilityto adapt the framework is also very important. xxxi Brittle or unchangeable systems are not likely to recover well, but those that are more flexible and willing or able to adapt to new realities are more likely to recover better. xxxii Examples of types and applications of horizon scanning activities have been suggested by Amanatidou, E., Butter, M., Carabias, V., et al. On Concepts and Methods in Horizon Scanning: Lessons from Initiating Policy Dialogues on Emerging Issues. In Science and Public Policy, 2012, 39:208-221. Global Risks 2013 39
  • 40. Section 1 Qualitative Assessment of National Figure 24: Resilience Question may be a Potential Variable for Recovery Component of Resilience Resilience Country As a first step towards developing the diagnostic framework, we have begun to explore perception survey data in assessing Economic Environmental Governance Infrastructure Social resilience. This year, the World Economic Forum introducedSection 2 questions about resilience into two of its global surveys: 1) the Robustness Robustness Robustness Robustness Robustness Global Risks Perception Survey (GRPS) measured the perceptions of the Forum’s expert network about their Redundancy Redundancy Redundancy Redundancy Redundancy nation’sxxxiii resilience to global risks; and 2) the Executive Opinion Survey (EOS) introduced a question to assess a Resourcefulness Resourcefulness Resourcefulness Resourcefulness Resourcefulness government’s effectiveness in managing risks in 2012.26 The qualitative assessment will be coupled with a quantitative Response Response Response Response Response one that includes statistical data by country.xxxiv This will result in a rating that combines perception data and objective data (i.e. Recovery Recovery Recovery Recovery RecoverySection 3 qualitative and quantitative data), and that enables an analysis of patterns among resilience, risk management, competitiveness Source: World Economic Forum and sustainability (see Appendix 3 for examples). Our working hypothesis is that if leaders wish to assess the potential support for improving their country’s resilience, then perception surveys Figure 25: Countries’ Ability to Adapt and Recover from are a good place to start. Economic and Environmental Risksxxxviii Global Risks Perception Survey (GRPS): Resilience Brazil Question Germany Over 1,000 respondents to the GRPS were asked, per risk xxxv IndiaSection 4 and regarding their country of expertise: Italy “If this risk materialized in your country* of expertise, what is the Japan ability of the country to adapt and/or recover from the impact?” People’s Republic of China (*Your country refers to the country you selected in the respondent’s information page.) Russian Federation Switzerland This question enables us to understand respondents’ United Kingdom perceptions of the ability of a country to adapt and/or recover from the impact of global risks. In the survey, respondents USA assess this ability against all five categories of global risks: 1 1.5 2 2.5 3 3.5 4 4.5 economic, environmental, geopolitical, societal andSection 5 Country Recovery/Adaptation technological. Assuming, economic global risks will highly Economic Risks impact the country’s economic subsystem, and environmental Environmental Risks global risks will highly impact the country’s environmental Margin of Error (95% confidence) subsystem (see Figure 24).xxxvi This section focuses on analyzing how these country subsystems are expected to recover after a Source: World Economic Forum crisis caused by economic and environmental global risks. Switzerland was perceived as having the highest ability to adapt Data collected from the current GRPS gave us sufficient and/or recover from economic and environmental global risks; responses for the analysis of 10 countries: Brazil, China, both Italy and India were rated relatively low. Japan was seen to Germany, India, Italy, Japan, Switzerland, Russia, the United have a comparable ability to Switzerland to adapt and recoverSection 6 Kingdom and the United States.27,xxxvii Figure 25 illustrates these from environmental risks, but lower in terms of economic risks. countries’ ability to recover from and adapt to economic and This may be a reflection of frustration about Japan’s economic environmental risks respectively. position and the risk of recession. The question from the GRPS is one indicator for the response component of the proposed resilience framework. It represents the way respondents perceive their country’s ability to adapt to and/or recover from certain types of global risks. In building a framework for National Resilience, further analysis will provide insights into areas needing greater investment and resources to build resilience. xxxiii Country is the country of expertise. xxxiv Statistical data may be obtained from open-source databases and other indices. See Appendix 3 for more potential qualitative and quantitative indicators identified. xxxv The Global Risks Perception Survey is a major input into the annual Global Risks Report. See Appendix 1. xxxvi Further work will try to identify how one type of risk can affect multiple or all of the country’s subsystems, not just the subsystems from which the risk originally manifested itself. xxxvii These countries had a calculated margin of error smaller than 0.5 units. Please see xxxviii Appendix 3 for more details on sample size and margin of errors for these and other The error bars in the figure indicate the margin of error for each country per category (at a countries. 95% confidence level). 40 Global Risks 2013
  • 41. Section 1Executive Opinion Survey: Risk Management Effectiveness Figure 27: Government’s Risk Management Effectiveness andQuestion the Country’s Overall Competitiveness ScoreOver 14,000 respondents to the Executive Opinion Survey 5.2 Europe(EOS)xxxix were asked: South America 5 Germany“How would you assess your national government’s overall risk Government’s risk management effectiveness North America 4.8 United Kingdom Switzerlandmanagement effectiveness of monitoring, preparing for, Asia Section 2responding to and mitigating against major global risks (e.g. 4.6 China United Statesfinancial crisis, natural disasters, climate change, pandemics, 4.4etc.)? (1 = Not effective in managing major global risks; 7 = India ItalyEffective in managing major global risks)” 4.2 Brazil 4Research28 has linked the ability to respond effectively andefficiently during a crisis with good risk management, which cuts 3.8across all five subsystems. The question above from the EOS 3.6 Russian Federation Japancollected perceptions from business managers about theirgovernment’s risk-management effectiveness. Therefore, for the 3.4 Section 3purpose of this analysis, we focus on the governance subsystem 3.4 3.6 3.8 4 4.2 4.4 4.6 4.8 5 5.2 5.4 5.6 5.8 6and response component of resilience, as illustrated in Figure 26. Global Competitiveness Index Score Source: World Economic ForumFigure 26: Government’s Risk Management Effectiveness may Additional analysis revealed other potential indicators that maybe a Potential Variable for the Response Component of the be linked to risk management, which will require furtherGovernance Subsystem. scrutiny. Correlation analysis showed there were moderate relationships between the government’s risk management Country effectiveness and the following seven indicators from the EOS (Further details are available in Appendix 3).xli Economic Environmental Governance Infrastructure Social Section 4 -- Politicians’ ability to govern Robustness Robustness Robustness Robustness Robustness -- Business-government relations -- Reform implementation efficiency Redundancy Redundancy Redundancy Redundancy Redundancy -- Public trust of politicians -- Wastefulness of government spending Resourcefulness Resourcefulness Resourcefulness Resourcefulness Resourcefulness -- Measures to combat corruption and bribery Response Response Response Response Response -- Government provision of services for improved business performance Section 5 Recovery Recovery Recovery Recovery Recovery The most related questions seem to be intuitively what one might expect. Of the seven indicators, the most highlySource: World Economic Forum correlated question is that on leadership, i.e. a politician’s ability to govern. This corroborates the message about leadership in risk management at the country level of the Global Risks 2012Figure 27 demonstrates that there may be a link between a report special feature on The Great East Japan Earthquake. Itgovernment’s risk management effectiveness and that also underscores the recommendation from the Global Riskscountry’s overall competitiveness. As observed, a country with 2007 report to establish the role of National Risk Officers.xliihigh risk-management effectiveness appears to have scoredhighly in competitiveness, and a country with low risk- Other interesting relationships highlighted above were withmanagement effectiveness appears to have scored low in business-government relations and government provision of Section 6competitiveness (except Japan). From further analysis of the services for improved business performance. TheseEOS question on the 10 countries from the Global Risks relationships require further analysis but they may indicate theSurvey,xl we can see that governments in Germany, Switzerland ability to share information effectively to improve monitoring andand the United Kingdom are perceived by business leaders to risk preparedness. By assessing government wastefulness,have comparatively high risk-management effectiveness. While reform-process efficiency and corruption, we may be able toIndia and Italy scored relatively lower on the GRPS output, deduce that effective risk management practices are likely to beRussia was seen as having the least effective risk management transparent and adaptive.based on the EOS responses. In addition, although in Figure 25Japan was seen to have greater ability to recover from The analysis in this subsection is an initial indication for how weenvironmental risks, its government’s risk-management intend to proceed with building the National Resilience Rating. Iteffectiveness was rated poorly in comparison to other is also a step towards understanding how questions from thecountries’. GRPS and the EOS may identify indicators for the different components of resilience, which will be further complemented with quantitative data in the interim report in summer 2013. xli Analysis has shown that there are strong relationships between most of the questionsxxxix The Executive Opinion Survey is carried out among CEOs and top executives and is a (other than the risk management question) in the Executive Opinion Survey. major input into the annual Global Competitiveness Report and the Global xlii A Country Risk Officer – analogous to Chief Risk Officers in the corporate world – would be Competitiveness Index, and Sustainable Competitiveness work. http://www.weforum.org/ the focal point for managing a portfolio of risk across disparate interests, setting national globalcompetitiveness prioritization of risk and allowing governments to engage in the forward action needed toxl These countries had sufficient sample sizes. begin managing global risks rather than merely coping with them. Global Risks 2013 41
  • 42. Section 1 Next Steps Towards a National Box 5: Supply Chain Risk Initiative Resilience Rating Launched by the World Economic Forum in May 2011, the Supply Chain Risk Initiative (SCRI) addresses the need for a As early as 2007, the Global Risks report suggested the creation better risk-based approach for safeguarding global supply of the role of Country Risk Officer. The national resilience rating chains and published the report “New Models for Addressing proposed in this Special Report would enable such officers and Supply Chain and Transport Risk” in 2012. US Secretary ofSection 2 other decision-makers to benchmark and track a nation’s level Homeland Security Janet Napolitano also joined the call for of resilience, understand the balance that needs to be struck increased global dialogue by launching at the Annual Meeting between resilience and other goals, and identify areas that may 2012 in Davos-Klosters the first US Strategy for Global Supply require further investment. Chain Security. For example, the national resilience rating will also help decision- Phase I of the work brought agreement on priorities and makers to think about resilience in supply chains.xliii According to recommendations for action: the World Economic Forum’s Dynamic Resilience in Supply Chain project, this is rising to the top of the political and 1. Improve international and interagency compatibility of executive agendas in the wake of recent major disruptions, but resilience standards and programmesSection 3 there remains a reluctance to invest in resilience due to lack of 2. More explicitly assess supply chain and transport risks as good data (see Box 5). part of procurement, management and governance processes There is also a lack of knowledge about practical actions that 3. Develop trusted networks of suppliers, customers, leaders can take to build resilience. To tackle this shortfall, the competitors and government focused on risk management Risk Response Network has built its Resilience Practices Exchange (RPE)xliv using the latest social network technology, 4. Improve network risk visibility, through two-way information which will build and share knowledge about effective practices sharing and collaborative development of standardized risk online (see Box 6). assessment and quantification tools 5. Improve pre- and post-event communication on systemic More broadly, the Risk Response Network’s goal is to build a disruptions and balance security and facilitation to bring aSection 4 common discussion framework in the global community, more balanced public discussion nurturing a culture of risk and resilience awareness across stakeholder groups. We invite readers of this Special Report to Phase IIxlv of the Supply Chain Risk Initiative entailed regional contact us at http://www.weforum.org/globalrisks2013 or at workshop across Asia, Europe and North America which rrn@weforum.org with suggestions on how to approach brought together supply chain and risk experts from across measuring national resilience. government and industry to: -- Deepen collective understanding of the risk and threat landscape -- Work towards a blueprint for a resilient global supply chainSection 5 -- Improve transparency across supply chains. Addressing the vulnerabilities identified in Phase I (e.g. reliance on oil and weak information flow), Phase II focused on shared efforts to build resilience. Resilience has been the core focus as risk assessment goes hand in hand with resilience it has implications to the strategy of governments and organizations. The Forum identified measures such as improving information sharing between governments and businesses, harmonizing legislative standards and building a common risk assessmentSection 6 framework for building resilient supply chains. Development of risk assessment framework is critical to improve supply chains adaptability to build resilience. The core components are data and information sharing for improved visibility along the supply chain. xliii The World Economic Forum’s findings in “Dynamic Resilience in Supply Chains” provide multiple working definitions, which include concepts related to the ability to reorganize and deliver core function continually, to bounce back from large scale disruptions, and to build xlv The initiative’s Phase II report, “Dynamic Resilience in Supply Chains”, is scheduled for a capacity through collective and simultaneous efforts. launch at the January 2013 Annual Meeting in Davos-Klosters. To learn more about the xliv initiative please visit http://www.weforum.org/supplychain. For more details, please refer to the box on the Resilience Practices Exchange. 42 Global Risks 2013
  • 43. Section 1Box 6: Resilience Practices Exchange (RPE) Box 7: One Year On Resilience PracticesThe Resilience Practices Exchange (RPE) is an initiative of the Practices to Improve Resilience from the 2012 Risk CasesWorld Economic Forum to share insights and ideas that improvenational and organizational resilience to global risks. World Economic Forum’s Risk Response Network, in collaboration with PwC, has revisited the three cases in theBy providing an online, interactive repository of ideas, the RPE Global Risks 2012 report – Seeds of Dystopia, How Safe are Our Section 2aims to improve resilience to global risks within organizations, Safeguards? and The Dark Side of Connectivity – to analyseindustries and countries, as well as across economic, practices to improve resilience against the risks highlighted inenvironmental, geopolitical, societal and technological areas. A each case, available on our interactive website.digital platform enables a diverse community of experts to -- Seeds of Dystopia (with further collaboration from Eurasiacontribute, discuss and explore various existing practices as a Group): As fiscal, ageing and employment trends combine tobasis for further exchange, evaluation and innovation (Figure 28). threaten the emergence of a new class of fragile states, theFigure 28: Resilience Practices Exchange Process private sector, civil society, local and national governments, as well as multilateral organizations need to work in concert to create a modern and sustainable social contract. The resilience practices highlighted here are engaging multiple Section 3 stakeholders in solutions based on holistic insights; Exchange continuous monitoring of trends to enable assumptions to be revisited; promoting open and inclusive attitudes towards Contribute immigrants; and embracing innovative financing models. -- How Safe are Our Safeguards? Jurisdictional safeguards against cross-border risks can quickly become outdated in Practices Discuss Evaluate Practices an interdependent and rapidly changing environment. Practices that improve resilience can be found by looking for common threads in two very different areas – financial system stability and pandemic influenza. The resilience-enhancing Section 4 Explore practices highlighted are: revisiting underlying assumptions related to safeguards in place; introducing forward-looking Innovate elements such as stress testing and scenario planning into safeguard development; leveraging incentives; and promoting cross-border collaboration among governments and other organisations.Source: World Economic Forum -- The Dark Side of Connectivity: In an increasinglyThe aim is to develop a process that takes a suggested practice hyperconnected world, the impacts of our successes andthrough a community discussion phase and then on to a process mistakes are significantly magnified. Resilience of cyberspaceof evaluation and innovation to improve that practice. This is could be strengthened by treating cyber security as a Section 5limited not only to the online exchange but can also involve board-level issue within organisations; establishingin-person meetings, virtual meetings, workshops and other forms mechanisms for governments and private companies toof engagement with the Forum’s Risk Response Network. share information in a trusted space, and for governments to collaborate in emergency cyber-attack situations; andThe RPE is a secure platform currently accessible only by designing devices and systems that incorporate as muchmembers of the Forum’s Risk Response Network and Network of protection as possible against inevitable human error.Global Agenda Councils. The RPE may be accessed through asecure and trusted online platform of the World Economic Forum.xlvi For the full case responses, please refer to the following webpage, http://www.weforum.org/globalrisks2013/Examples of Resilience Building Practices followup2012. Section 6-- The G20 establishing the cross-border Financial Stability Board (FSB): A regulatory body to coordinate financial services regulators and international standard-setting bodies across borders and organizations.-- The Indonesian government response to the 2004 Tsunami in Aceh Province, Indonesia: After the 2004 Indian Ocean tsunami and earthquake, the Government of Indonesia set up a pragmatic and region-based agency to effectively lead the relief efforts in the province of Aceh.-- Governmental cyber risk information-sharing partnerships: Governments are setting up agencies to share information with international partners, including overseas governments, agencies and businesses to provide an international, informed response to cyber risks.Please contact resilience.exchange@weforum.org for furtherinformation.xlvi For more information, please see http://rpe.weforum.org. Global Risks 2013 43
  • 44. Section 1 References 1. Kaplan, R.S. & Mikes, A. Managing Risks: A New Framework. In Harvard Business Review, 2012. 2. Ibid. 3. Comfort, L. K., Boin, A., & Demchak, C. C. The Rise of Resilience, in Designing Resilience: Preparing for Extreme Events. Pittsburg: University of Pittsburgh Press, 2010. 4. Ibid. Martin-Breen, P. & Anderies, J.M. “Resilience: A Literature Review”. Rockefeller Foundation, http://www.rockefellerfoundation.org/news/publications/resilience-literature-review, 2011; andSection 2 Longstaff, P.H. “Security, Resilience, and Communication in Unpredictable Environments Such as Terrorism, Natural Disasters, and Complex Technology”. Harvard University Center for Information Policy Research, http://pirp.harvard.edu/pubs_pdf/longsta/longsta-p05-3.pdf, 2005. 5. Berkes, F. Understanding Uncertainty and Reducing Vulnerability: Lessons from Resilience Thinking. In Natural Hazards, 2007, 41:283-295. 6. Fiksel, J. Sustainability and Resilience: Toward a Systems Approach. In Sustainability: Science, Practice and Policy, 2006, 22:14-21. 7. Holling, C.S. Understanding the Complexity of Economic, Ecological, and Social Systems. In Ecosystems, 2001, 4:390-405; and Walker, B., Holling, C. S., Carpenter, S. R., & Kinzig, A. Resilience, Adaptability and Transformability in Social-ecological Systems. In Ecology and Society, 2004, 9. 8. Holling, C.S. From Complex Regions to Complex Worlds. In Ecology and Society, 2004, 9; Holland, J.H. Studying Complex Adaptive Systems. In Journal of Systems Science & Complexity, 2005, 19:1-8; and Folke, C. Resilience: The Emergence of a Perspective for Social-ecological Systems Analyses. In Global Environmental Change, 2006, 16:253-267.Section 3 9. Bruneau, M., Chang, S. E., Eguchi, R. T., et al. A Framework to Quantitatively Assess and Enhance the Seismic Resilience of Communities. In Earthquake Spectra, 2003, 19:733; and Bruneau M. Seismic Resilience of Communities-conceptualization and Operationalization. In International Workshop on Performance-based Seismic-Design, 2004. 10. The Global Competitiveness Report 2011-2012. 2011. Geneva: World Economic Forum. 11. OECD Studies in Risk Management: Innovation in Country Risk Management. 2009. Paris: Organisation for Economic Co-operation and Development. 12. Berkes, F. Understanding Uncertainty and Reducing Vulnerability: Lessons from Resilience Thinking. In Natural Hazards, 2007, 41:283-295. 13. Bruneau, M., Chang, S. E., Eguchi, R. T., et al. A Framework to Quantitatively Assess and Enhance the Seismic Resilience of Communities. In Earthquake Spectra, 2003, 19:733. 14. Global Risks 2012. 2012. Geneva: World Economic Forum. 15. Bruneau, M., Chang, S. E., Eguchi, R. T., et al. A Framework to Quantitatively Assess and Enhance the Seismic Resilience of Communities. In Earthquake Spectra, 2003, 19:733.Section 4 16. Ibid. 17. Walker, B. H., Abel, N., Anderies, J. M., & Ryan, P. Resilience, Adaptability, and Transformability in the Goulburn-broken Catchment, Australia. In Ecology and Society, 2009, 14:12. 18. Berkes, F. Understanding Uncertainty and Reducing Vulnerability: Lessons from Resilience Thinking. In Natural Hazards, 2007, 41:283-295. 19. Swanson, D., Barg, S., Tyler, S., et al. Seven Guidelines for Policy-Making in an Uncertain World. In Creating Adaptive Policies: a Guide for Policy-Making in an Uncertain World, Swanson D. and Bhadwal S., (eds). 2009, Sage: London. 20. Bruneau, M., Chang, S. E., Eguchi, R. T., et al. A Framework to Quantitatively Assess and Enhance the Seismic Resilience of Communities. In Earthquake Spectra, 2003, 19:733. 21. Ozdemir, V. and Knoppers, B.M. From Government to Anticipatory Governance: Responding to the Challenges of Innovation and Emerging Technologies. In Governance for Health, Kickbusch, I. and Gleicher, D. (eds). (In Press), Springer: New York. 22. Swanson, D., Barg, S., Tyler, S., et al. Seven Guidelines for Policy-Making in an Uncertain World. In Creating Adaptive Policies: a Guide for Policy-Making in an Uncertain World, Swanson D. andSection 5 Bhadwal S., (eds). 2009, Sage: London; Kickbusch, I. & Gleicher, D. “Governance for Health in the 21st Century”. World Health Organization, http://www.euro.who.int/__data/assets/pdf_ file/0010/148951/RC61_InfDoc6.pdf, 2012; and Klijn, E.-H. Trust in Governance Networks: Looking for Conditions for Innovative Solutions and Outcomes. In The New Public Governance? Emerging Perspectives on the Theory and Practice of Public Governance, S.P. Osborne (ed). 2009, Routledge: London. 23. Bruneau, M., Chang, S. E., Eguchi, R. T., et al. A Framework to Quantitatively Assess and Enhance the Seismic Resilience of Communities. In Earthquake Spectra, 2003, 19:733. 24. Amanatidou, E., Butter, M., Carabias, V., et al. On Concepts and Methods in Horizon Scanning: Lessons from Initiating Policy Dialogues on Emerging Issues. In Science and Public Policy, 2012, 39:208-221. 25. Swanson, D., Barg, S., Tyler, S., et al. Seven Guidelines for Policy-Making in an Uncertain World. In Creating Adaptive Policies: a Guide for Policy-Making in an Uncertain World, Swanson D. and Bhadwal S., (eds). 2009, Sage: London. 26. The Global Competitiveness Report 2011-2012. 2011. Geneva: World Economic Forum.Section 6 27. Malleret, T. & Cleary, S. Resilience to Risk. Cape Town: Human and Rousseau, 2006. 28. Ibid. “Preemptive Risk Management Strategies: Advance Recovery and the Development of Resilient Organisations and Societies”. In Integrative Risk Management: Advanced Disaster Recovery Risk Dialogue Series, Swiss Reinsurance Company Ltd, http://www.hks.harvard.edu/ var/ezp_site/storage/fckeditor/file/pdfs/centers-programs/programs/crisis-leadership/ Risk_Dialogue_Ch%202.pdf, 2010; and Kunreuther, H. & Useem, M. Learning from Catastrophes: Strategies for Reaction and Response. New Jersey: Pearson Education, Inc, 2010. 44 Global Risks 2013
  • 45. Section 1Survey Findings Section 2In this section, the results from the annual The Risk Landscape Section 3Global Risks Perception Survey are presented For each of the 50 global risks, respondents were asked toin detail. They collate the views of more than assess, on a scale from 1 to 5, the likelihood of the risks occurring over the next 10 years and the impact if the risk were1,000 experts from the World Economic to occur.Forum’s communities. Respondents are aged Figure 29 indicates the average values of these two measuresbetween 19 and 79, come from different types for each of the 50 global risks in their respective categories (seeof organizations, different fields of specialist also Figure 2 the Global Risks Landscape scatterplot, showing them in one combined graph). Almost all dots on the scatterplots Section 4knowledge, and from over 100 countries.xlvii are above and to the right of the midpoints (at 3 or more) of the 1 to 5 axes, suggesting that the majority of the 50 global risks were rated, on average, as having high likelihood and impact. Nonetheless, there is some interesting variation in the dots’ placement on the landscape. Some economic risks, such as major systemic financial failure, chronic fiscal imbalances and severe income disparity are far out towards the top-right hand corner, with impact and likelihood scores around 4 (on a scale from 1 to 5, which is high for an average ranking). Some of the Section 5 technological risks are closer to the middle of the axes, with impact and likelihood scores 3 or less. As was observed in previous editions of the Global Risks report, there appears to be a strong relationship between the likelihood and impact. The dots seem to line up loosely around the 45-degree line and there are no dots in the bottom-right or top-left corners of the plot. Survey respondents seem to be associating high-likelihood events with high impacts. Section 6 This finding holds up even when looking at individual responses for each of the risks, and not only average numbers. The colourful tiles in Figure 30 show how the responses are distributed across the scatterplot for each of the 50 risks. While there were some responses that were off the 45-degree line, the combinations of impact and likelihood that got the most votes from survey respondents – as indicated by the dark-coloured tiles – seem to be near that diagonal in almost all of the 50 diagrams. Still it is interesting to observe how for some risks, particularly technological risks such as critical systems failure, the answers are more distributed than for others – chronic fiscal imbalances are a good example. It appears that there is less agreement among experts over the former and stronger consensus over the latter.xlvii See Appendix 1 for a more detailed description of the sample. Global Risks 2013 45
  • 46. Section 1 Figure 29: Global Risks Landscape by Categories and their Descriptions Economic 1 Chronic fiscal imbalances Failure to redress excessive government debt obligations. Economic 2 Chronic labour market A sustained high level of underemployment and 5 imbalances unemployment that is structural rather than cyclical in nature. 4 1 3 Extreme volatility in Severe price fluctuations make critical commodities 3 energy and agriculture unaffordable, slow growth, provoke public protest andSection 2 5 8 4 prices increase geopolitical tension. 2 1 Economic 7 3 4 Hard landing of an The abrupt slowdown of a critical emerging economy. 10 8 2 emerging economy 3.5 4 7 5 Major systemic financial A financial institution or currency regime of systemic 10 5 4 1 failure importance collapses with implications throughout the global 3.5 Impact if the risk Impact ifoccur if were to were to occur 4 financial system. 6 3 9 8 6 Prolonged infrastructure Chronic failure to adequately invest in, upgrade and secure were toImpact the risk occur 2 3 neglect infrastructure networks. 9 67 10 7 Recurring liquidity crises Recurring shortages of financial resources from banks and 3.5 4 capital markets. 3Section 3 the risk 8 Severe income disparity Widening gaps between the richest and poorest citizens. 6 9 Unforeseen negative Regulations which do not achieve the desired effect, and 2.5 9 consequences of instead negatively impact industry structures, capital flows 2.5 3 3.5 4 regulation and market competition. 3 2.5 Likelihood to occur in the next ten years 10 Unmanageable inflation Failure to redress extreme rise or fall in the value of money 2.5 3 3.5 4 or deflation relative to prices and wages. Environmental to occur in the next ten years Likelihood Environmental 1 Antibiotic-resistant bacteria Growing resistance of deadly bacteria to known antibiotics. 2.5 4 2 Failure of climate change Governments and business fail to enforce or enact effective 2.5 3 3.5 4 adaptation measures to protect populations and transition businesses Likelihood to occur in the next ten years 2 7 impacted by climate change. 4Section 4 Environmental 2 3 Irremediable pollution Air, water or land permanently contaminated to a degree that 3 6 7 threatens ecosystems, social stability, health outcomes and 1 4 economic development. 3.5 3 6 4 Land and waterway use Deforestation, waterway diversion, mineral extraction and 4 9 1 8 4 5 3.5 mismanagement other environment modifying projects with devastating Impact if the risk Impact ifoccur if were to were to occur 2 7 impacts on ecosystems and associated industries. 10 8 5 9 5 Mismanaged urbanization Poorly planned cities, urban sprawl and associated were toImpact the risk occur 3 3 6 infrastructure that amplify drivers of environmental 10 degradation and cope ineffectively with rural exodus. 1 4 3.5 3 6 Persistent extreme Increasing damage linked to greater concentration of 8 5 weather property in risk zones, urbanization or increased frequency the risk 9 of extreme weather events.Section 5 2.5 10 7 Rising greenhouse gas Governments, businesses and consumers fail to reduce 2.5 3 3.5 4 emissions greenhouse gas emissions and expand carbon sinks. 3 2.5 Likelihood to occur in the next ten years 8 Species overexploitation Threat of irreversible biodiversity loss through species 2.5 3 3.5 4 extinction or ecosystem collapse. Geopolitical Likelihood to occur in the next ten years 9 Unprecedented Existing precautions and preparedness measures fail in the geophysical destruction face of geophysical disasters of unparalleled magnitude such Geopolitical as earthquakes, volcanic activity, landslides or tsunamis. 2.5 4 10 Vulnerability to Critical communication and navigation systems disabled by 2.5 3 2 3.5 4 Likelihood to occur in the next ten years geomagnetic storms effects from colossal solar flares. 4 5 Geopolitical 2Section 6 4 1 Critical fragile states A weak state of high economic and geopolitical importance 85 that faces strong likelihood of collapse. 3.5 1 4 7 2 Diffusion of weapons of The availability of nuclear, chemical, biological and radiological 10 8 4 mass destruction technologies and materials leads to crises. 3.5 1 Impact if the risk Impact ifoccur if were to were to occur 2 7 3 Entrenched organized Highly organized and very agile global networks committing 6 10 3 5 crime criminal offences. were toImpact the risk occur 3 10 3 4 4 Failure of diplomatic The escalation of international disputes into armed conflicts. 6 8 conflict resolution 3.5 1 3 10 7 5 Global governance Weak or inadequate global institutions, agreements or networks, 10 failure combined with competing national and political interests, impede the risk attempts to cooperate on addressing global risks. 3 2.5 6 6 Militarization of space Targeting of commercial, civil and military space assets and 2.5 3 3.5 4 related ground systems that can precipitate or escalate an 3 10 2.5 Likelihood to occur in the next ten years armed conflict. 2.5 3 3.5 4 7 Pervasive entrenched The widespread and deep-rooted abuse of entrusted power Societal Likelihood to occur in the next ten years corruption for private gain. 8 Terrorism Individuals or a non-state group successfully inflict large-scale Societal human or material damage. 2.5 4 10 9 Unilateral resource Unilateral moves by states to ban exports of key commodities, 2.5 3 3.5 4 Likelihood to occur in the next ten years nationalization stockpile reserves and expropriate natural resources. 2 4 10 10 Widespread illicit trade Unchecked spread of illegal trafficking of goods and people Societal 8 throughout the global economy. 4 9 26 46 Global Risks 2013 3.5 8 6 4 9 7 4 1 5 10 r
  • 47. 6 Impact if the risk were to Impact if 10 Section 1 3 2.5 2.5 3 3.5 4 Likelihood to occur in the next ten years Societal 2.5 1 Backlash against Resistance to further increased cross-border mobility of globalization labour, goods and capital. 2.5 3 3.5 4 Likelihood to occur in the next ten years 2 Food shortage crises Inadequate or unreliable access to appropriate quantities and 4 quality of food and nutrition. 10 Societal 3 Ineffective illicit drug Continued support for policies that do not abate illegal drug 2 policies use but do embolden criminal organizations, stigmatize drug 8 users and exhaust public resources. Section 2 6 4 4 9 10 4 Mismanagement of Failure to address both the rising costs and social challenges 3.5 population ageing associated with population ageing. 7 2 1 5 5 Rising rates of chronic Increasing burden of illness and long-term costs of treatment 8 Impact if the risk were tothe risk were to occur 4 disease threaten recent societal gains in life expectancy and quality. 6 9 6 Rising religious Uncompromising sectarian views that polarize societies and 3.5 3 fanaticism exacerbate regional tensions. 3 7 1 5 7 Unmanaged migration Mass migration driven by resource scarcity, environmental Impact if occur degradation and lack of opportunity, security or social stability. 8 Unsustainable Unsustainably low or high population growth rates and sizes, 3 population growth creating intense and rising pressure on resources, public 3 Section 3 2.5 institutions and social stability. 2.5 3 3.5 4 9 Vulnerability to Inadequate disease surveillance systems, failed international Likelihood to occur in the next ten years pandemics coordination and the lack of vaccine production capacity. Technological 10 Water supply crises Decline in the quality and quantity of fresh water combine with 2.5 increased competition among resource-intensive systems, 2.5 3 3.5 4 such as food and energy production. Likelihood to occur in the next ten years 4 Technological 1 Critical systems failure Single-point system vulnerabilities trigger cascading failure of critical information infrastructure and networks. 2 Cyber attacks State-sponsored, state-affiliated, criminal or terrorist cyber attacks. 1 Section 4 4 3 Failure of intellectual The loss of the international intellectual property regime as an 3.5 2 property regime effective system for stimulating innovation and investment. 6 10 8 4 Massive digital Deliberately provocative, misleading or incomplete informationImpact if the risk were tothe risk were to occur 4 5 misinformation disseminates rapidly and extensively with dangerous 1 consequences. 3.5 2 6 5 Massive incident of data Criminal or wrongful exploitation of private data on an 3 9 3 10 8 fraud/theft unprecedented scale. Impact if occur 4 5 6 Mineral resource supply Growing dependence of industries on minerals that are not widely 7 vulnerability sourced with long extraction-to-market time lag for new sources. 3 7 Proliferation of orbital Rapidly accumulating debris in high-traffic geocentric orbits 9 3 2.5 debris jeopardizes critical satellite infrastructure. Section 5 7 3 8 Unforeseen Attempts at geoengineering or renewable energy 2.5 3.5 4 Likelihood to occur in the next ten years consequences of climate development result in new complex challenges. change mitigation 2.5 9 Unforeseen The manipulation of matter on an atomic and molecular level consequences of raises concerns on nanomaterial toxicity. 2.5 3 3.5 4 nanotechnology Likelihood to occur in the next ten years 10 Unforeseen Advances in genetics and synthetic biology produce consequences of new unintended consequences, mishaps or are used as weapons. life science technologies NB: The scatter plots show the average value, across all responses, of the likelihood and impact of the 50 global risks, as measured on the horizontal and vertical axes, respectively. Source: World Economic Forum Section 6 Global Risks 2013 47
  • 48. Section 1 Figure 30: Distribution of Survey Responses Economic Environmental Geopolitical Societal Technological Chronic fiscal Chronic labour Antibiotic-resistant Failure of Critical fragile Diffusion of Backlash against Food shortage Critical systems Cyber imbalances market bacteria climate change states weapons of mass globalization crises failure attacks imbalances adaptation destructionSection 2 5 5 5 5 5 5 5 5 5 5 4 4 4 4 4 4 4 4 4 4 3 3 3 3 3 3 3 3 3 3 2 2 2 2 2 2 2 2 2 Impact 1 1 1 1 1 1 1 1 1 Likelihood 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 Extreme volatility Hard landing of Irremediable Land and Entrenched Failure of Ineffective illicit Mismanagement Failure of Massive digital in energy and an emerging pollution waterway use organized diplomatic drug policies of population intellectual misinformation agriculture prices economy mismanagement crime conflict resolution ageing property regime 5 5 5 5 5 5 5 5 5 5 4 4 4 4 4 4 4 4 4 4 3 3 3 3 3 3 3 3 3 3Section 3 2 2 2 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 Major systemic Prolonged Mismanaged Persistent Global Militarization of Rising rates of Rising religious Massive incident Mineral resource financial failure infrastructure urbanization extreme governance space chronic disease fanaticism of data supply neglect weather failure fraud/theft vulnerability 5 5 5 5 5 5 5 5 5 5 4 4 4 4 4 4 4 4 4 4 3 3 3 3 3 3 3 3 3 3 2 2 2 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 Unforeseen Recurring Severe income Rising greenhouse Species Pervasive Terrorism Unmanaged Unsustainable Proliferation of consequencesSection 4 liquidity crises disparity gas emissions overexploitation entrenched migration population orbital debris of climate corruption growth change mitigation 5 5 5 5 5 5 5 5 5 5 4 4 4 4 4 4 4 4 4 4 3 3 3 3 3 3 3 3 3 3 2 2 2 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 Unforeseen Unforeseen negative Unmanageable Unprecedented Vulnerability to Unilateral Widespread Vulnerability to Water supply Unforeseen consequences of consequences inflation geophysical geomagnetic resource illicit trade pandemics crises consequences new life science of regulation or deflation destruction storms nationalization of nanotechnology technologies 5 5 5 5 5 5 5 5 5 5 4 4 4 4 4 4 4 4 4 4Section 5 3 3 3 3 3 3 3 3 3 3 2 2 2 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 NB: These diagrams show how individual survey responses are distributed across the different possible combinations of likelihood and impact scores, as measured, respectively, on the horizontal and vertical axes of the graphs. The darker the colour of the tile, the more often that particular combination was chosen by the experts who took the survey. Source: World Economic Forum Compared with Last Year Particularly interesting cases which had big increases in both likelihood and impact scores are: While there is some movement of individual dots, comparedSection 6 with last year’s scatter plot, the general distribution of the -- the technological risks: unforeseen consequences of new life risks on the risk landscape is, perhaps unsurprisingly, science technologies and unforeseen consequences of similar (see Figure 1). What is surprising, though, is that climate change mitigation; respondents this year see risks as more likely and as having -- the economic risks: unforeseen negative consequences of a higher impact than respondents to the previous year’s regulation, hard landing of an emerging economy and chronic survey. The average likelihood score is 0.15 units higher (on labour market imbalances; a scale from 1 to 5), and the average impact score is 0.13 -- the two sides of global demographic imbalances: units higher. unsustainable population growth and mismanagement of population ageing; and Part of the increase in impact (about a quarter of the -- the geopolitical risk: unilateral resource nationalization. difference) can be explained by the fact that the average age of the survey sample has decreased, and as shown below, Only very few risks had their average scores decrease from last younger people tend to give higher answers when it comes year. On the likelihood scale, these include recurring liquidity to assessing a risk’s impact. Nonetheless, even controlling crises, vulnerability to geomagnetic storms and proliferation of for age and other different characteristics of the sample, the orbital debris. The only risk where there was a statistically fact remains that the perceived likelihood and impact of significant decrease in terms of its impact was food shortage many of the risks have increased. crises. 48 Global Risks 2013
  • 49. Section 1By Region of Residence By OrganizationSurvey respondents were asked to provide some information Similarly, it is possible to look at how the perceptions of peopleabout their background: their age, their gender, where they live, who work at different types of organizations differ. This year, thefor what kind of organization they work, and their subject-area differences are less pronounced than last year. One strikingexpertise. Using this demographic data the risks landscape was observation, though, is that for many risks, people working forcut up in different ways to see how different groups with specific NGOs tend to assign higher scores than their peers from other Section 2characteristics perceive global risks. organizations. In particular, people from NGOs see many risks as more likely than respondents from the government sector,Figure 31, for instance, shows how respondents based in North and they rate impacts more highly than those in the businessAmerica tend to rate many risks as having a higher likelihood world (see Appendix 2 for more results).than respondents in other regions. The dots are markedly furtherto the right in the scatter plot, and for a large number of risks the Figure 32: Comparison between Organizational Affiliationsdifferences with other regions are statistically significant. These Academia Businessinclude chronic fiscal imbalances, prolonged infrastructure 4.5 4.5neglect, rising greenhouse gas emissions, diffusion of weaponsof mass destruction and cyber attacks (see Appendix 2 for 4 4detailed results). Section 3 3.5 3.5The scatterplot for Latin America demonstrates thatrespondents based in that region tend to assign a higher impact 3 3to risks. For instance, they see the impact of ineffective illicit drugpolicies as significantly higher than survey takers from other Impact Impactregions. It is also interesting that average responses from Likelihood 3 3.5 4 4.5 Likelihood 3 3.5 4 4.5respondents based in Asia are clustered more densely together. Government International Organization 4.5 4.5Figure 31: Comparison between Regions of Residence Section 4 4 4 Asia Europe 4.5 4.5 3.5 3.5 4 4 3 3 Impact Impact 3.5 3.5 Likelihood 3 3.5 4 4.5 Likelihood 3 3.5 4 4.5 3 3 NGO Other 4.5 4.5 Section 5 Impact Impact Likelihood 3 3.5 4 4.5 Likelihood 3 3.5 4 4.5 4 4 Latin America Middle East/North Africa 3.5 3.5 4.5 4.5 3 3 4 4 Impact Impact 3.5 3.5 Likelihood 3 3.5 4 4.5 Likelihood 3 3.5 4 4.5 3 3 Section 6 Source: World Economic Forum Impact Impact Likelihood 3 3.5 4 4.5 Likelihood 3 3.5 4 4.5 North America Sub-Saharan Africa 4.5 4.5 4 4 3.5 3.5 3 3 Impact Impact Likelihood 3 3.5 4 4.5 Likelihood 3 3.5 4 4.5Source: World Economic Forum Global Risks 2013 49
  • 50. Section 1 By Gender By Age The difference in perception between genders is very Figure 34 shows that respondents aged 40 or younger tend to pronounced, with women tending to rate both the likelihood and rate most risks as higher in impact than those over 40. There is no impact of most risks higher than men. On average, the likelihood risk where the older group’s impact scores are significantly higher. rating is 0.11 units higher for women than for men, while the difference between the impact scores is 0.21 units.xlviii For many risks, the younger experts also chose higher likelihoodSection 2 scores. But there are a few exceptions, where respondents over For most individual risks, this difference was statistically 40 rated risks as more likely to occur in the next 10 years than significant at the 5% level. There is only one risk, backlash the respondents under 40: prolonged infrastructure neglect, against globalization, which men rated as more likely than failure of climate change adaptation, rising greenhouse gas women. emissions and diffusion of weapons of mass destruction. The overall finding that men are generally less worried about In contrast to the differences between the genders, the psycho- risks than women is in line with what has been observed in other metric literature is less clear on the effect of age on risk percep- surveys about perceptions of other kinds of risk.1 The literature is tions. Some studies find that younger people generally worry less not in agreement as to the reasons for this result. Some believe about risks.2 However, most of these look at adolescents and that women are generally more risk-averse than men, while personal risks such as driving, drinking and smoking. It is notSection 3 others argue the two genders perceive risks similarly but worry surprising that this finding does not carry over to perceptions of about different risks, so it matters which risks surveys ask about. global risks among experts in their third or fourth decade of life. Either explanation would have important implications for risk On the other hand, studies that look at age differences in general, managers and policy-makers wanting to use expert perceptions not only at teenagers, support the finding from the present to identify and assess global risks, and to make the most survey that younger people generally perceive risks as higher.3 informed decisions. It is interesting that high-level decision-makers tend to be drawn Figure 33: Comparison between Genders mostly from the group – older males – that the breakdowns by age and gender indicate is least inclined to worry about global risks. Economic EnvironmentalSection 4 4.5 4.5 Figure 34: Comparison between Age Groups 4 4 Economic Environmental 4.5 4.5 3.5 3.5 4 4 3 3 3.5 3.5 Impact ImpactSection 5 Likelihood 3 3.5 4 4.5 Likelihood 3 3.5 4 4.5 3 3 Geopolitical Societal Impact Impact 4.5 4.5 Likelihood 3 3.5 4 4.5 Likelihood 3 3.5 4 4.5 4 4 Geopolitical Societal 4.5 4.5 3.5 3.5 4 4 3 3Section 6 3.5 3.5 Impact Impact Likelihood 3 3.5 4 4.5 Likelihood 3 3.5 4 4.5 3 3 Technological Impact Impact 4.5 Male respondents Likelihood 3 3.5 4 4.5 Likelihood 3 3.5 4 4.5 Female respondents 4 Technological 4.5 Respondents > 40 yrs 3.5 Respondents ≤ 40 yrs 4 3 3.5 Impact Likelihood 3 3.5 4 4.5 3 Source: World Economic Forum Impact Likelihood 3 3.5 4 4.5 xlviii Controlling for other characteristics of the sample, the respective differences would be 0.087 and 0.18 units. Source: World Economic Forum 50 Global Risks 2013
  • 51. Section 1By Subject-matter Expertise Figure 35: Comparison between ExpertsFinally, it is possible to look at how subject expertise affects riskperceptions. Respondents were asked to identify in which of the Economic Environmentalfive categories (which group the 50 risks) they consider them- 4.5 4.5selves experts. While there is no generalization that can bemade about all risks, there are some interesting cases where 4 4 Section 2experts are more worried about risks. 3.5 3.5The differences between environmental experts and their peersfrom other fields are striking – they assign higher impact and 3 3likelihood scores to all 10 risks in the environmental category,with most of these differences being statistically significant at the Impact Impact5% level (see Appendix 2). Likelihood 3 3.5 4 4.5 Likelihood 3 3.5 4 4.5Also there are a number of societal risks where specialists are Geopolitical Societalmore alarmed than other respondents, such as rising rates of 4.5 4.5chronic diseases, unsustainable population growth or unman- Section 3aged migration. In the economic category, this pattern holds 4 4only for chronic fiscal imbalances. For most other risks in thiscategory, as well as in the geopolitical and in the technological 3.5 3.5domains, there are few statistically significant differences.On the other side of the equation, experts in economic issues 3 3worry less about the impact and likelihood of severe income Impact Impactdisparity than non-experts. Similarly, technological expertsworry less than non-experts about the likelihood and impact of Likelihood 3 3.5 4 4.5 Likelihood 3 3.5 4 4.5unforeseen consequences of nanotechnology. Section 4 Technological 4.5These findings raise interesting questions. Are economists more Experts in categoryinformed about economic issues than others, or are there Non-experts in categoryideological differences at play? Are the technological specialists 4more knowledgeable here, or does their excitement about newtechnologies dampen their risk perceptions? And where experts 3.5are more worried, does that mean that we should listen to themmore, or do they just feel more strongly about their issue without 3knowing enough about other threats? Impact Section 5 Likelihood 3 3.5 4 4.5 Source: World Economic Forum Section 6 Global Risks 2013 51
  • 52. Section 1 Centres of Gravity -- major systemic financial failure (economic) For each of the five categories, survey-takers were asked to pick -- failure of climate change adaptation (environmental) a “Centre of Gravity” – the one risk that they thought is the -- global governance failure (geopolitical) systemically most important one in that group. Due to their -- water supply crises (societal) influence on other risks, these are the risks to which leaders and -- critical systems failure (technological) policy-makers should pay particularly close attention. Figure 36Section 2 shows how the answers to this question are distributed among Three of the centres of gravity have changed from last year’s the different options. The top selected risks for Centres of report, in the economic, environmental and societal categories. Gravity this year are: Figure 36: Centres of Gravity by Category Economic risks Environmental risks Societal risksSection 3 Major systemic 2013 22.7 % Failure of climate 2013 26.2 % 2013 22.4 % financial failure change adaptation Water supply crises 2012 26.4 % 2012 22.0 % 2012 13.0 % Severe income 20.8 % Rising greenhouse 17.2 % Unsustainable 17.1 % disparity 18.1 % gas emissions 31.6 % population growth 23.9 % Chronic fiscal 19.9 % Mismanaged 14.9 % Food shortage 14.9 % imbalances 32.0 % urbanization 9.0 % crises 9.4 % Extreme volatility in energy and 10.3 % Persistent 9.5 % Rising religious 12.3 % agriculture prices 7.6 % extreme weather 7.0 % fanaticism 10.9 % Land and 6.8 % 9.3 % Mismanagement of 11.9 % Chronic labour waterway use market imbalances 3.5 % mismanagement 13.2 % population ageing 13.9 %Section 4 5.0 % Irremediable 8.9 % Backlash against 9.1 % Hard landing of an emerging economy 1.7 % pollution 6.2 % globalization 13.6 % Recurring 4.4 % Antibiotic-resistant 5.8 % Vulnerability to 3.9 % liquidity crises 2.2 % bacteria 3.8 % pandemics 3.4 % Unmanageable Unprecedented 4.2 % 4.9 % Rising rates of 3.5 % inflation or geophysical 2.6 % 5.1 % chronic disease 3.2 % deflation destruction Prolonged 3.2 % Species 2.1 % Unmanaged 2.9 % infrastructure 1.7 % overexploitation 1.5 % migration 8.3 % neglect Unforeseen negative 2.8 % Vulnerability to 1.3 % 1.9 % Ineffective illicit consequences geomagnetic 4.1 % 0.6 % drug policies 0.4 % of requlations storms 0 10 20 30 0 10 20 30 0 10 20 30Section 5 Percent of responses Percent of responses Percent of responses Geopolitical risks Technological risks Global governance 2013 29.2 % 2013 21.7 % Critical systems failure failure 2012 40.1 % 2012 44.8 % Pervasive entrenched 14.1 % 20.9 % 12.8 % Cyber attacks corruption 18.1 % Failure of diplomatic 13.8 % Unforeseen consequences 15.1 %Section 6 conflict resolution 8.5 % of climate change mitigation 4.1 % 12.0 % Mineral resource 12.8 % Terrorism 11.7 % supply vulnerability 8.7 % 10.6 % Massive digital 9.8 % Critical fragile states 14.7 % misinformation 7.2 % 9.5 % Unforeseen consequences of 7.8 % Diffusion of weapons of mass destruction 5.3 % new life science technologies 4.9 % 4.7 % Massive incident of 6.8 % Unilateral resource nationalization 1.9 % data fraud or theft 8.1 % Entrenched 3.8 % Failure of intellectual 3.4 % organized crime 2.6 % property regime 3.0 % 1.6 % Unforeseen consequences 1.0 % Widespread illicit trade 1.7 % of nanotechnology 0.6 % 0.8 % 0.8 % Militarization of space Proliferation of orbital debris 0.6 % 0.4 % 0 10 20 30 40 0 10 20 30 40 Percent of responses Percent of responses Source: World Economic Forum 52 Global Risks 2013
  • 53. Section 1Figure 37: The Risk Interconnection Map 2013 Vulnerability to geomagnetic storms Critical systems failure Militarization of space Prolonged infrastructure neglect Proliferation of orbital debris Cyber attacks Massive digital misinformation Section 2 Diffusion of weapons of mass destruction Massive incident of data fraud/theft Terrorism Rising religious fanaticism Critical fragile states Failure of diplomatic conflict resolution Unilateral resource nationalization Major systemic financial failure Widespread Entrenched organized crime illicit trade Hard landing of an emerging economy Failure of climate change adaptation Ineffective Global governance failure Mineral resource Unforeseen negative Land and waterway use supply vulnerability illicit drug consequences of regulation mismanagement policies Failure of intellectual property regime Section 3 Pervasive entrenched corruption Extreme volatility in energy and agriculture prices Food shortage crises Severe income disparity Backlash against globalization Water supply crises Species overexploitation Unprecedented Persistent extreme geophysical weather destruction Chronic labour market imbalances Unsustainable population growth Mismanaged urbanization Rising greenhouse gas emissions Chronic fiscal Unmanaged migration Recurring liquidity crises imbalances Unforeseen consequences Irremediable pollution of climate change mitigation Mismanagement of population ageing Rising rates of chronic disease Unmanageable inflation or deflation Section 4 Antibiotic resistant Unforeseen consequences of new life science technologies bacteria Vulnerability to pandemics Unforeseen consequences of nanotechnologySource: World Economic ForumInterconnections Figure 39: Top 10 Most Connected RisksFinally, the survey asked respondents to choose pairs of risks Global governance failure 44which they think are strongly interconnected.xlix They were asked topick a minimum of three and maximum of ten such connections. Severe income disparity 41 Section 5Putting together all chosen paired connections from all Critical fragile states 40respondents leads to the network diagram presented in Figure 37 Food shortage crises 33– the Risk Interconnection Map. The diagram is constructed sothat more connected risks are closer to the centre, while weakly Mismanaged urbanization 33connected risks are further out. The strength of the line depends Pervasive entrenched corruption 32on how many people had selected that particular combination. Extreme volativity in energy & agriculture prices 30529 different connections were identified by survey respondentsout of the theoretical maximum of 1,225 combinations possible. Failure of climate change adaptation 30The top selected combinations are shown in Figure 38. Unsustainable population growth 30 Section 6It is also interesting to see which are the most connected risks Chronic fiscal imbalances 29(see Figure 39) and where the five centres of gravity are located 0 10 20 30 40 50in the network (see Figure 40). Number of connections Source: World Economic ForumFigure 38: Top Five Most Selected Connections Box 8: The Global Risks 2013 Data Explorer Rising religious fanaticism 90 and Terrorism Severe income disparity Readers are invited to visit the Data Explorer on the and Backlash against globalization 79 accompanying website to the Global Risks 2013 report. There it Global governance failure 72 is possible to interact with the Global Risks Landscape, the and Major systemic financial failure Global Interconnection Map, and the data from the two newExtreme volativity in energy & agriculture prices and Food shortage crises 68 survey questions on national resilience. The data explorer is also Global governance failure an entry point to other relevant Forum reports, videos, and blog 59 and Failure of climate change adaptation posts – including the “What-If? Interview” seriesl by the Risk 0 20 40 60 80 100 Response Network – and many other types of resources around Number of responses each of the 50 global risks covered in this report.Source: World Economic Forumxlix Visit the Global Risks Data Explorer: http://www.weforum.org/ When two risks are connected, it simply means that respondents believe that there is some sort of correlation between the two. Causal direction cannot be deduced. globalrisks2013/dataexplorer. Global Risks 2013 53
  • 54. Section 1 Figure 40: Centres of Gravity and their Connections Vulnerability to geomagnetic storms Critical systems failure Prolonged infrastructure neglect Prolonged infrastructure neglect Cyber attacks Massive digital misinformation Massive digital misinformationSection 2 Terrorism Massive incident of data fraud/theft Terrorism Rising religious fanaticism Critical fragile states Critical fragile states Failure of diplomatic conflict resolution Failure of diplomatic conflict resolution Unilateral resource nationalization Major systemic financial failure Major systemic financial failure Failure of climate change adaptation Entrenched organized crime Global governance failure Mineral resource Global governance Global governance failurefailure supply vulnerability Unforeseen negative consequences of regulation Extreme volatility in energy and agriculture prices Failure of intellectual Extreme volatility in energy and agriculture prices Land and waterway use mismanagement Pervasive entrenched property regime corruption Food shortage crises Severe income disparity Water supply crises Backlash against globalization Species overexploitation Unprecedented Backlash against globalization Persistent extreme weather geophysical destruction Unsustainable population growth Unsustainable population growth Rising greenhouse gas emissions Mismanaged urbanization Unmanaged migration Mismanaged Unforeseen consequences Chronic fiscal imbalances Irremediable pollution urbanization of climate change mitigationSection 3 Unmanageable inflation or deflation Antibiotic resistant bacteria Unforeseen consequences of new life science technologies Critical systems failure Prolonged infrastructure neglect Prolonged infrastructure neglect Cyber attacks Massive digital misinformation Diffusion of weapons of mass destruction Massive incident of data fraud/theft Terrorism Rising religious fanaticism Critical fragile Critical fragile states states Failure of diplomatic conflict resolution Failure of diplomatic conflict resolution Unilateral resource nationalization Major systemic financial failure Major systemic financial failure Hard landing of an emerging economy Entrenched organized Failure of climate change adaptationSection 4 Entrenched organized crime crime Global governance Failure of climate change adaptation Mineral resource Global governance failure Unforeseen negative consequences of regulation failure supply vulnerability Failure of intellectual Extreme volatility in energy and agriculture prices Extreme volatility in energy and agriculture prices Pervasive entrenched property regime Pervasive entrenched Land and waterway use mismanagement corruption corruption Food shortage crises Food shortage crises Severe income disparity Backlash against globalization Severe income disparity Water supply crises Persistent extreme weather Chronic labour market imbalances Mismanaged Unsustainable population growth urbanization Unsustainable population growth Rising greenhouse gas emissions Rising greenhouse gas emissions Chronic fiscal Unmanaged Unmanaged migration Recurring liquidity crises imbalances migration Mismanaged Unforeseen consequences Irremediable pollution Irremediable pollution urbanization of climate change mitigation Rising rates of chronic disease Vulnerability to pandemics Unforeseen consequences of nanotechnology Critical systems failureSection 5 Prolonged infrastructure neglect Cyber attacks Massive digital misinformation Diffusion of weapons of mass destruction Massive incident of data fraud/theft Terrorism Rising religious fanaticism Critical fragile states Failure of diplomatic conflict resolution Unilateral resource nationalization Major systemic financial failure Global Widespread Hard landing of an emerging governance illicit trade economy failure Failure of climate change adaptation Entrenched organized crime Mineral resource Unforeseen negative consequences of regulation Land and waterway supply vulnerability use mismanagement Pervasive entrenched corruption Failure of intellectual Extreme volatility property regime in energy and Food shortage crises agriculture prices Severe income disparity Water supply crises Species overexploitation Persistent Unprecedented geophysical Backlash against globalization extremeSection 6 weather destruction Chronic labour market imbalances Mismanaged Unsustainable population growth urbanization Rising greenhouse gas emissions Chronic fiscal Unmanaged Recurring liquidity crises imbalances migration Unforeseen consequences Irremediable l pollution of climate change mitigation Mismanagement of population ageing Rising rates of chronic disease Unmanageable inflation or deflation Unforeseen consequences of new life science technologies 1. Finucane, M. L., Slovic, P., Mertz, C. K., & Flynn, J. Gender, Race, and Perceived Risk: the ’White Male’ Effect. In Health, Risk and Society, 2000, 2:159-172; Gustafson, P.E. Gender Differences in Risk Perception: Theoretical and Methodological Perspectives. In Risk Analysis, 1998, 18:805-811; and Harris, C. R., Jenkins, M., & Glaser, D. Gender Differences in Risk Assessment: Why do Women Take Fewer Risks than Men. In Judgment and Decision Making, 2006, 1:48-63. 2. Deery, H.A. Hazard and Risk Perception among Young Novice Drivers. In Journal of Safety Research, 1999, 30:225-236; and Jonah, B.A., & Dawson, N.E. Youth and Risk: Age Differences in Risky Driving, Risk Perception, and Risk Utility. In Alcohol, Drugs & Driving, 1987, 3:13-29. 3. Savage, I. Demographic Influences on Risk Perceptions. In Risk Analysis, 1993, 13:413-420. l The “What If?” series seeks to generate new insights around risks that global experts from academia, business, government and civil society believe to be underappreciated. By exploring hypothetical scenarios in detail, leaders are able to uncover complex interconnectivity between systems and issues and by exploring global risks as scenarios, experts have the space to surface sensitive issues. The What-If series is a platform for leaders to assess their resilience against such risks and even seize opportunities they may present. 54 Global Risks 2013
  • 55. Section 1X Factors Section 2In this section, developed in collaboration Runaway Climate Change Section 3with Nature, a leading science journal, the The threat of climate change is well known. But have we passedRisk Response Network asks readers to the point of no return? What if we have already triggered alook beyond our high-risk concerns of the runaway chain reaction that is in the process of rapidly tipping Earth’s atmosphere into an inhospitable state?moment to consider a set of five X factorsand reflect on what countries or companies The natural greenhouse effect is a prerequisite for life on our planet. Without it, Earth’s global average surface temperatureshould be doing to anticipate them. would be far below zero. But our planet’s climate is a volatile Section 4 beast. Small fluctuations in the Earth’s orbit around the sun can exert a major influence on our climate. So can the varyingIn a world of many uncertainties we are concentration in Earth’s atmosphere of heat-trapping moleculesconstantly on the search to identify “X such as carbon dioxide, to which we have been adding through greenhouse gas emissions.factors” – emerging concerns of possible How pronounced and how fast the warming will be (and how itfuture importance and with unknown will affect rainfall and storminess where you live) is hard to say asconsequences. Looking forward and even the most sophisticated computer models cannot capture all the factors involved in a system as complex as the Earth. Butidentifying emerging issues will help us to it could be more dramatic and difficult to adapt to than most Section 5anticipate future challenges and adopt a scientists predict, because of the natural ‘feedbacks’ in the system, linked to processes in the oceans1 and on land2. Theymore proactive approach, rather than being have the potential of amplifying climate change to a point ofcaught by surprise and forced into a fully fundamentally disrupting the global system. The much-debated questions are where these tipping points lie, how soon theyreactive mode. might be reached, whether they can be predicted – and what will happen when they are crossed.3X factors are serious issues, grounded in thelatest scientific findings, but somewhat Section 6remote from what are generally seen asmore immediate concerns such as failedstates, extreme weather events, famine,macroeconomic instability or armed conflict.They capture broad and vaguely understoodissues that could be hatching grounds forpotential future risks (or opportunities). Global Risks 2013 55
  • 56. Section 1 The perhaps best-known positive feedback mechanism is the so-called ice-albedo feedback. In a warmer world there will be less snow and sea ice. Their melting reveals the darker land and water surfaces below, which absorb more solar heat. More absorption then causes yet more melting and warming, and so forth, in a self-reinforcing feedback loop. The unprecedented thawing of 97% of Greenland’s surface ice in July 2012, for example, has led to aSection 2 darkening of Greenland’s ice cap, meaning it will begin to absorb higher levels of solar energy and melt faster still. Melting of the complete Arctic summer sea ice – the Arctic is expected to be seasonally ice-free by around 2040 – could probably be reversed on human timescales if greenhouse gases are reduced and temperature drops. But if the several kilometre- thick ice sheets that cover Greenland and Antarctica dwindle, they may not so easily reappear in a cooler world. New ice would have to form at low elevations, where temperatures are higher.Section 3 Permafrost melting, land use and vegetation changes, and the effects of changing cloud cover provide for other major feedback mechanisms. Some scientists suspect that by 2040 up to 63 billion extra tonnes of carbon – and up to 380 billion tonnes by Enhancement could come from hardware as well as drugs. A 2100 – might be released by the thaw and degradation of handful of studies in people show that electrical stimulation – permafrost soil alone.4 either directly via implanted electrodes or through the scalp with transcranial magnetic stimulation (TMS) – can boost memory. Finally, there is the potentially huge feedback effect of water Cochlear implants are already standard treatment for the deaf, vapour, a natural greenhouse gas in itself. A warmer atmosphere and motor implants for controlling neural prosthetics and can hold more water. As the average air temperature soars in devices are developing fast and seem likely to become availableSection 4 response to our burning of fossil fuels, evaporation and more widely in coming years. Retinal implants for the blind are a atmospheric concentration of water vapour will increase, further bit further behind, but the field is booming and it seems likely intensifying the greenhouse effect. On Venus, this probably caused that they will be worked out soon. a runaway greenhouse effect, which boiled away the oceans that may have existed in the planet’s early history. The best interfaces still rely on invasive brain electrodes (noninvasive techniques do work, but are slow and inefficient), Luckily, man-made climate warming has virtually no chance of which is the major barrier to these being adopted by healthy producing a runaway greenhouse effect analogous to Venus. people. But it seems conceivable that within 10 years we will Even so, scientists with the Intergovernmental Panel on Climate either have a new method for recording brain activity or the Change (IPCC) reckon that the water vapour feedback on Earth noninvasive signals will be decoded more efficiently. Direct brainSection 5 could be strong enough to double the greenhouse effect due to interfaces of devices and sensors within our lifetimes is not out the added carbon dioxide alone. of the question, opening a new realm of enhanced neurobiology for those who can afford it. While climate change debates of the past decade centred around whether or not mankind could be responsible at all for altering a This will pose ethical issues in many walks of life akin to those system as great at Earth’s climate, we may be rapidly moving into which surround “doping” in the world of professional sports. Will forced discussions on how best to strengthen mankind’s resilience we accept the idea that significant cognitive enhancement and adaptive capacity to cope as Earth’s climate auto-pilot should be available to purchase on the open market? Or will mercilessly hurtles us toward a new and unknown equilibrium. there be, as there now is with performance enhancers in competitive sports, a push for legislation to maintain a more levelSection 6 playing field? Significant Cognitive Enhancement There is, in addition, a significant risk of cognitive enhancement going very wrong. Cognitive enhancement pharmaceuticals work Once the preserve of science fiction, superhuman abilities are by targeting particular neurotransmitter systems, and therefore will fast approaching the horizon of plausibility. Will it be ethically most likely have wide-ranging action. There is a significant accepted for the world to divide into the cognitively-enhanced possibility of unintended effects on other systems – for example, and unenhanced? What might be the military implications? drugs to enhance learning might lead to a greater willingness to take risks; drugs to enhance working memory might lead to Scientists are working hard to develop the medicines and increased impulsive behavior. Recent research suggests that, in therapies needed to heal the brain of mental illnesses such as addition to boosting memory, TMS could be used to manipulate a Alzheimers and schizophrenia. Although progress has been person’s beliefs of right versus wrong or to suspend moral slow, it is conceivable that in the not-too-distant future, judgement altogether. It could also be used to “erase” memory and researchers will identify compounds that improve on existing deliberately cause permanent brain damage without the use of cognitive pharmaceutical enhancers (e.g. Ritalin, modafinil). invasive procedure or blunt force trauma. Although they will be prescribed for significant neurological disease, effective new compounds which appear to enhance intelligence or cognition are sure to be used off-label by healthy people looking for an edge at work or school. 56 Global Risks 2013
  • 57. Section 1Both the intended and unintended effects of such new However, a long series of ethical, legal and scientific questionstechnologies would open whole new categories of potential quickly arises about countless knock-on effects that might be“dual-use” dilemmas. (Dual-use describes technologies which much more difficult to assess. The problem is that incomingcan be used for good as well as for substantial harm.) It is not solar radiation drives the entire climate system, so reducingdifficult to see how such drugs could find applications in armed sunlight would fundamentally alter the way energy and waterforces and law enforcement contexts, or conversely by criminal moves around the planet. Almost any change in weather andorganizations and terrorist groups. They could spark an arms climate patterns is likely to create winners and losers, but Section 2race in the neural “enhancement” of combat troops.5 determining causation and quantifying impacts on any given region or country would be a massive challenge.Such advancements could have profound impacts in 20 to 50years on societal norms affecting how we approach issues Nobody envisions deployment of solar radiation managementincuding education and training, disparity between groups in anytime soon, given the difficulties in resolving a suite ofsociety, informed consent and exploitation, and international governance issues (evidenced by the fact that even thelaws on warfare. relatively simple SPICElii experiment in the UK foundered in the midst of controversy).6 Beginning with Britain’s Royal Society, many academic and policy bodies have called for cautiousRogue Deployment of Geoengineering research as well as broader conversation about the implications Section 3 of such technologies.In response to growing concerns about climate change, scientistsare exploring ways in which they could, with international But this has led some geoengineering analysts to begin thinkingagreement, manipulate the earth’s climate. But what if this about a corollary scenario, in which a country or small group oftechnology were to be hijacked by a rogue state or individual? countries precipitates an international crisis by moving ahead with deployment or large-scale research independent of theGeoengineering can refer to many things, but it is most often global community. The global climate could, in effect, be hijackedassociated with a scientific field that has come to be known as by a rogue country or even a wealthy individual, with unpredict-“solar radiation management”. The basic idea is that small particles able costs to agriculture, infrastructure and global stability.could be injected high into the stratosphere to block some of theincoming solar energy and reflect it back into space, much as The problem is that the only way to truly test solar radiation Section 4severe volcanic eruptions have done in the past. In stark contrast management is at scale. This potentially conflates large-scaleto decades of technological evolution and political disputes about research with deployment, thereby giving rogue nations politicaloverhauling energy infrastructure to reduce greenhouse emissions, cover under the guise of science. Much research has gone intosolar radiation management would act quickly and would be whether a programme could be targeted at the Arctic, forcheap to implement – though side-effects may make it a very instance, where the impacts of global warming are being felt theexpensive option. most, but some researchers suggest that the impacts could quickly migrate from the Arctic to other regions. Many say that aMost research has focused on sulphur injection via aircraft. true test of solar radiation management would have to be global.Recent studies suggest that a small fleet of aircraft could inject amillion tonnes of sulphur compounds into the stratosphere – Due to such complexities, most of the science to date has been Section 5enough to offset roughly half of the global warming experienced conducted via computer modelling, although scientists areto date – for US$1-2 billion annually.li In theory, the technology looking for ways to test these ideas with local experiments. Butwould be tantamount to a planetary thermostat, giving humans overall, despite calls for more coordinated government sciencedirect control over global temperature. The direct impact of programmes, the funding landscape for this kind of sciencedimming the sun would be felt within weeks to months. remains spotty. This leaves a gap for unregulated experimentation by “rogue” parties. For example, an island state threatened with rising sea levels may decide they have nothing to lose, or a well funded individual with good intentions may take matters into their own Section 6 hands. There are signs that this is already starting to occur. In July 2012 an American businessman sparked controversy when he dumped around 100 tonnes of iron sulphate into the Pacific Ocean off the west coast of Canada in a scheme to spawn an artificial plankton bloom. The plankton absorb carbon dioxide and may then sink to the ocean bed, removing the carbon – another type of geoengineering, known as ocean fertilisation. Satellite images confirm that his actions succeeded in produce an artificial plankton bloom as large as 10,000 square kilometres. The individual hoped to net lucrative carbon credits, but his actions may have been in violation of two international agreements.7 Observers are concerned that this may be a sign of what is to come.8li The most detailed cost and engineering analysis was commissioned by David Keith, currently at Harvard University, and conducted by Aurora Flight Sciences. That analysis, lii formally completed in July 2011, suggests that a small fleet of aircraft could inject a million Stratospheric Particle Injection for Climate Engineering (SPICE) is a UK government-funded tonnes of sulphur into the stratosphere – enough to offset roughly half of the global warming geoengineering research project that aims to assess the feasibility of injecting particles into experienced to date – for US$ 1-2 billion annually. the stratosphere from a tethered balloon for the purposes of solar radiation management. Global Risks 2013 57
  • 58. Section 1 Costs of Living Longer Life expectancy has increased steadily in every decade since 1840, but these gains do not necessarily portend better health in later life.14 Thus, a new wave of disabled seniors may be on the We are getting better at keeping people alive for longer. Are we way. The proportion of Americans aged 50 to 64 who reported setting up a future society struggling to cope with a mass of needing help with personal care activities – things like getting arthritic, demented and, above all, expensive, elderly who are in into and out of bed, and climbing ten steps – increased need of long term care and palliative solutions? significantly in the decade ending in 2007. Arthritis was the topSection 2 cause, and diabetes played a prominent and growing role.15 The blessings of 20th-century medicine look set to explode with the deciphering of the genome and attendant advances. It is Are there fixes that can avert the coming storm? There are hoped that big inroads against common banes such as heart well-known but difficult-to-implement preventive measures that disease, cancer and stroke, may be in the offing. Consider the could help us live both longer and better quality of lives: impact on society of a growing number of elderly infirm who are paramount among them is exercise, with its near-universal protected from the most common causes of death today, but benefits for our physiologies and for warding off pathology.16 with an ever deteriorating quality of life as other ailments that do Obvious ways to mitigate cost implications would include raising not kill, but seriously disable, start to dominate. the eligibility ages for the programmes that support the elderly from the public purse – retirement income, social supportSection 3 Current trends are already setting the stage for such a future services or reduced-cost health care – and raising the retirement scenario in the West. Already, the demographics of the Baby age, requiring older adults to be productive economically for Boom are working against us: conservative estimates say that longer. One recent analysis, using a “delayed aging” model, the number of Americans afflicted with Alzheimer’s disease will found that hundreds of billions of dollars in increased costs to at least double, to 11 million, by mid-century.9 Similar rises are the US Medicare and Social Security programmes could be projected for many countries, with the global population of the entirely offset by raising the eligibility ages for Medicare and demented expected to double every 20 years until it exceeds Social Security by a few years (from 65 to 68, and from 67 to 115 million in 2050.10 A key driver will be increasing elderly 68).17 populations and potentially declining fertility rates in low and middle income countries. However, raising eligibility ages for public services is not a panacea, in part because financial costs are not the onlySection 4 The looming expense of caring for these masses is mind challenge. The impacts of aging populations will be felt boggling, especially in high-income countries. The UK, for throughout society, from changing best practices in urban instance, spends nearly as much each year caring for the planning to impacting social norms around care-giving. More demented (£23 billion) as it does on stroke (£5 billion), heart research is needed to turn chronic conditions to acute disease (£8 billion) and cancer (£12 billion) combined.11 And the conditions (i.e. by developing curative treatments), and find numbers afflicted with all of these maladies are only going to solutions that increase the capacity of all citizens to manage grow. chronic conditions and to create wealth at the same time. Consider Medicare, the US health programme for the elderly. Assuming no policy changes – for instance, no increase in the Discovery of Alien LifeSection 5 age of eligibility – the programme’s outlays are expected to exceed its taxpayer-funded income by more than US $24 trillon over the next 75 years.12,liii The spending trend is not limited to Given the pace of space exploration, it is increasingly government support, either. In the US, the cumulative total of conceivable that we may discover the existence of alien life or public and private consumption by the elderly has ballooned in other planets that could support human life. What would be the the last half century. The burden is accentuated in rapidly-aging effects on science funding flows and humanity’s self-image?It countries like Germany, where the ratio of effective producers was only in 1995 that we first found evidence that other stars also per consumer is projected to decline nearly 25% by 2030.13 have planets orbiting them. Now thousands of “exoplanets” revolving around distant stars have been detected. NASA’s Kepler mission to identify Earth-sized planets located in the “GoldilocksSection 6 Zone” (not too hot, nor too cold) of Sun-like stars, has only been operating for 3 years and has already turned up thousands of candidates, including one the size of Earth. The fact that Kepler has found so many planet candidates in such a tiny fraction of the sky suggests there are countless Earth-like planets orbiting sun-like stars in our galaxy. In 10 years’ time we may have evidence not only that Earth is not unique, but that life exists elsewhere in the universe. Suppose the astronomers who study exoplanets one day find chemical signs of life – for example, a spectrum showing the presence of oxygen, a highly reactive element that would quickly disappear from Earth’s atmosphere if it were not being replenished by plants. Money might well start flowing for new telescopes to study these living worlds in detail, both from the ground and from space. New funding and new brain power might be attracted to the challenges of human space flight and the technologies liii See page 46 and 47 under “financial statements” at http://www.gao.gov/financial/ necessary for humanity, or its A.I. emissaries, to survive an fy2011/11stmt.pdf. Add total liabilities for Medicare parts A, B and D together to get US$ inter-stellar crossing. 24.5 trillion. (3,252 billion + 18,854 billion + 7,466 billion) 58 Global Risks 2013
  • 59. Section 1The discovery would certainly be one of the biggest news stories Referencesof the year, and interest would be intense. But it would not changethe world immediately. Alien life has been ‘discovered’ before, after 1. Schmittner, A. & Galbraith, E.D. Glacial Greenhouse-gas Fluctuations Controlled by Ocean Circulation Changes. In Nature, 2008, 456:373-6.all. Around the turn of the 20th century, the US astronomer Percival 2. Arneth, A., Harrison, S. P., Zaehle, S., et al. Terrestrial Biogeochemical Feedbacks in the ClimateLowell convinced a great many people (including himself) that System. In Nature Geoscience, 2010, 3:525-532. 3. Lenton, T. M., Held, H., Kriegler, E., et al. Tipping Elements in the Earth’s Climate System. InMars was crisscrossed by a vast system of canals built by a dying Proceedings of the National Academy of Sciences, 2008, 105:1786-93.civilization. But the belief that humankind was not alone did not do Section 2 4. Schuur, E.A. & Abbott, B. Climate Change: High Risk of Permafrost Thaw. In Nature, 2011, 480:32-3.much to usher in an era of brotherhood and earthly harmony, nor 5. Tennison, M.N. & Moreno, J.D. Neuroscience, Ethics, and National Security: The State of the Art.did it stop the outbreak of World War I in 1914. In PLoS Biology, 2012, 10:e1001289. 6. Cressey, D. Cancelled Project Spurs Debate over Geoengineering Patents. In Nature, 2012, 485:429.The discovery’s largest near-term impact would likely be on 7. “Decision Adopted by the Conference of the Parties to the Convention On Biological Diversity atscience itself. Suppose observations point to a potential future its Tenth Meeting: X/33 Biodiversity and climate change”. UNEP, Convention on Biological Diversity, http://www.cbd.int/climate/doc/cop-10-dec-33-en.pdf, 2010; and Lukacs, M. World’shome for mankind around another star, or the existence of life in Biggest Geoengineering Experiment ‘Violates’ UN Rules. In The Guardian, 2012.our solar system – in the Martian poles, or in the subsurface 8. Macnaghten, P. & Owen, R. Environmental Science: Good Governance for Geoengineering. In Nature, 2011, 479:293.oceans of Jupiter’s frozen moon Europa, or even in the 9. “Recommendations of the Public Members of the Advisory Council on Alzheimer’s Research,hydrocarbon lakes of Saturn’s moon Titan. Scientists will Care, and Services”. U.S. Department of Health and Human Services, Advisory Council on Alzheimer’s Research, http://aspe.hhs.gov/daltcp/napa/AdvCounRec.pdf, 2012.immediately start pushing for robotic and even human missions to Section 3 10. Dementia: A Public Health Priority. 2012. Geneva: World Health Organization;study the life forms in situ – and funding agencies, caught up in the 11. Ibid.; and Luengo-Fernandez, R., Leal, J. & Gray, A.M. UK Research Expenditure on Dementia,excitement, might be willing to listen. Heart Disease, Stroke and Cancer: Are Levels of Spending Related to Disease Burden? In European Journal of Neurology, 2012, 19:149-54. 12. “Financial Statements of the United States Government for the Years Ended September 30,The fledgling space economy had a big year in 2012, which saw the 2011, and 2010”. Financial Management Services, http://www.fms.treas.gov/fr/11frusg/11stmt. pdf, 2011.birth of space trucking when the first commercially built and 13. Lee, R. & Mason, M. “Population Aging and the Welfare State in Europe”. Global Trends 2030,operated spacecraft successfully rendezvoused with the http://gt2030.com/2012/08/01/population-aging-and-the-welfare-state-in-europe/, 2012.International Space Station, and a host of celebrity billionaires 14. Crimmins, E.M. & Beltrán-Sánchez, H. Mortality and Morbidity Trends: Is There Compression of Morbidity? In The Journals of Gerontology Series B: Psychological Sciences and Socialdeclared intentions to make asteroid mining a reality. Discovery of an Sciences, 2011, 66B:75-86.Earth 2.0 or life beyond our planet might inspire new generations of 15. Martin, L. G., Freedman, V. A., Schoeni, R. F., et al. Trends in Disability and Related Chronic Conditions among People Ages Fifty to Sixty-four. In Health Affairs (Millwood), 2010, 29:725-31.space entrepreneurs to also take on the challenge of taking human 16. Tatar, M., Bartke, A. & Antebi, A. The Endocrine Regulation of Aging by Insulin-like Signals. In Section 4exploration of the galaxy from the realm of fiction to fact. Science, 2003, 299:1346-51. 17. Goldman, D. Personal Communication. In Nature, Editor 2012.Over the long term the psychological and philosophical implica-tions of the discovery could be profound. If lifeforms (even fossilizedlifeforms) are found in our own solar system, for example, it will tellus that the origin of life is ‘easy’ – that anyplace in the universe lifecan emerge, it will emerge. It will suggest that life is as natural andas ubiquitous a part of the universe as stars and galaxies are. Thediscovery of even simple life would fuel speculation about theexistence of other intelligent beings and challenge many assump-tions which underpin human philosophy and religion. Section 5Through basic education and awareness campaigns the generalpublic can achieve a higher science and space literacy andcognitive resilience that would prepare them and preventundesired social consequences of such a profound discovery andparadigm shift concerning mankind’s position in the universe. Section 6 Global Risks 2013 59
  • 60. Section 1 Conclusion The eighth edition of the Global Risks report has sought to highlight the theme of resilience in the context of systems thinking. Exogenous in nature, global risks cannot be adequately managed or mitigated by any single organisation. We have introduced the conceptual framework of Professors Kaplan andSection 2 Mikes1, contrasting “external” risks such as global risks with “preventable” and “strategic” risks, to assist clarity of thought about how global risks should be approached. Whenever it is difficult to predict how and when a risk will manifest, nurturing resilience is the preferred approach. Throughout this report we have sought to frame risks in a systems context given its nature of interdependencies and to assist clarity of thinking about the best ways to build resilience. Our three risk cases have discussed what happens when twoSection 3 major systems are stressed simultaneously (Testing Economic and Environmental Resilience); when a seemingly more minor system punches above its weight (Digital Wildfires in a Hyperconnected World); and when we become complacent in the continued ability of a system to stay one step ahead of a changing problem (The Dangers of Hubris on Human Health). In the Special Report, we explored the thinking of systems theorists about how to build resilient systems, describing how five components – redundancy, robustness, resourcefulness, response and recovery – can be applied to selected nationalSection 4 subsystems. As ever, this report forms the starting point of dialogue which will continue throughout the year, through a number of channels: our dedicated virtual platform for members of the Risk Response Network’s trusted community; the Resilience Practices Exchange; workshops with our report partners and their stakeholders; regional events around the world; and, of course, our Annual Meetings in the People’s Republic of China and in Davos-Klosters, Switzerland, where the theme for 2013 is resilient dynamism.Section 5 Specifically, in 2013 we will take forward the task of building a trusted network of risk experts to help global leaders map, mitigate, monitor and enhance resilience to global risks. And we will work to develop and refine the National Resilience Rating proposed in the Special Report. The hyperconnected nature of the modern world makes it increasingly urgent to understand how best to build resilience in the face of global risks. More information on these initiatives and other World EconomicSection 6 Forum activities on global risks can be found at www.weforum.org/risk. You can contact us at rrn@weforum.org and stay connected by following us at @WEFRisk. 1 Kaplan, R.S. & Mikes, A. Managing Risks: A New Framework. In Harvard Business Review, 2012. 60 Global Risks 2013
  • 61. Section 1Appendix 1 Figure 41: Breakdown of Survey Sample Type of OrganizationThe Survey International Organizations - 95 (7.7%) Government - 100 (8.1%) Section 2 Other - 102 (8.3%) Business - 519 (42.1%) NGO - 198 (16.0%) Academia - 220 (17.8%) Region of Residence Sub-Saharan Africa - 72 (5.8%)Survey Sample Middle East/North Africa - 77 (6.2%) Section 3 Europe - 368 (29.8%) Latin America - 116 (9.4%)The Global Risks Perception Survey was carried out as an onlinesurvey during September 2012. The purpose of the survey is tosample the views of the World Economic Forum’s communities, Asia - 274 (22.2%)which comprise of top experts and high-level leaders frombusiness, academia, NGOs, international organizations, the North America - 327 (26.5%)public sector and civil society. Over 6,000 invitations were sentout and 1,234 respondents returned the questionnaire with Region of Expertiseusable information; 1,006 of these were complete responses –compared to 469 in 2011. Section 4 Middle East/North Africa - 83 (6.7%) Sub-Saharan Africa - 95 (7.7%) Europe - 316 (25.6%)In the 2012 survey, in addition to greater diversity of affiliation,respondents also come from more diverse regions of the world Latin America - 132 (10.7%)(see Figure 41). They indicated 101 different countries as theircountry of residence, and self-identified expertise on 115different countries. This has increased compared to 2011, where North America - 302 (24.5%) Asia - 306 (24.8%)only 69 countries were chosen as country of residence. Therewas an increase in representation from Asia, Latin America,Middle East/North Africa and Sub-Saharan Africa with a larger Agenumber of responses from Japan, China and India for Asia; Section 5Costa Rica, Mexico and Brazil for Latin America; and Nigeria 19-20 3and South Africa for Sub-Saharan Africa. 20-30 294 30-40 249The survey sample includes experts in a range of subjects.Approximately 29% of respondents are female, and the average 40-50 288age of survey respondents is 43. With the inclusion of the new 50-60 216Global Shapers Community – a group of young leaders between 60-70 12520 and 30 years oldliv – the range of age groups covered by thesurvey is wider than it was last year. 70-80 21 100 200 300 Section 6The survey sample closely resembles the targeted survey Number of responsespopulation as described above. The distribution of peopleacross regions and types of organizations is nearly identical; the Area of Expertiseaverage age is slightly lower (by two years) and the proportion ofwomen is slightly higher (by 3 percentage points). It is important Economic Issues 612to note that the data is not intended to be representative of wider Societal Issues 569populations than this specific survey population. Geopolitical Issues 372 Technological Issues 327 Environmental Issues 234 100 200 300 400 500 600 Number of responses NB: Multiple selections were possible for the question on expertise Source: World Economic Forumliv See http://www.weforum.org/globalshapers for more information. Global Risks 2013 61
  • 62. Section 1 The Questionnaire The questionnaire consisted of three different sections with the following questions: Appendix 2 Section 1 covered the above-mentioned demographic information. LikelihoodSection 2 and Impact In Section 2, respondents were asked to assess each of the 50 global risks covered in this report, by stating how they would rate, on a scale from 1 to 5, the likelihood that the risk is to occur over the next 10 years, and if it were to occur, the impact it would have on the world. In addition, a new question was introduced this year to think about the country that they had identified in Section 1 as the country about which they have most expertise, and rate the Likelihood: ComparisonsSection 3 ability of that country to adapt and/or recover from the impact of each of the 50 global risks. The number of survey responses received from different regions ranges from 64 from Sub-Saharan Africa to 330 from Europe. The answer options to these three questions were presented as For stakeholder groups the range was from 88 from international Likert-type scales, where the respondent, using a slider on the organizations to 471 from business. As illustrated in Table 1, out screen, was able to select a value ranging from 1 (low) to 5 (high) of 50 global risks, only two risks – extreme volatility in energy as well as the midpoints between these integers. and agriculture prices and major systemic financial failure – did not have any statistically significant differences between any For each category of risks – economic, environmental, groups. The other 48 risks had at least one group difference. geopolitical, societal and technological – the last question in Arguably the risk with the most differences, especially betweenSection 4 Section 2 asks survey respondents to select what they thought regions, was failure of drug policies. would be the “Centre of Gravity”, i.e. the single most important risk from a systemic perspective. They could choose from the 10 Only 8 out of 50 risks had statistically significant differences risks in each category via a drop-down menu. between respondents under 40 and over 40 years of age. Four of these risks were in the environmental category: failure of Finally, in Section 3, respondents were asked to identify strong climate change adaptation, irremediable pollution, rising connections between pairs of risks. They had the opportunity to greenhouse gas emissions, and unprecedented geophysical select at least three and up to 10 combinations, by dragging tiles destruction. into paired boxes from the pool of 50 risks. Similarly, the environmental category had the largest percentageSection 5 Margin of Errors of risks with statistically significant differences between experts and non-experts. Where there are differences, generally experts Based on the spread of the answers as well as the survey perceived the risk as more likely to occur, though non-experts sample size, one can calculate the margin of error, based on a found four risks more likely: severe income disparity, 95% confidence level. unmanageable inflation and deflation, rising religious fanaticism and unforeseen consequences of nanotechnology. Interestingly, For the global likelihood and global impact questions (Figures 1, rising religious fanaticism was one of the most highly connected 2, 29, 30), which were answered by all 1,234 respondents, the risks in the Risks Interconnection Map. maximumlv margin of error is 0.07 units. Finally, where there were statistically significant genderSection 6 For the question on the Centres of Gravity (Figure 36), the differences, females were more pessimistic and rated the risks maximumlvi margin of error is 2.7 percentage points. as more likely to occur. The biggest difference between male and female opinions was regarding the risk of unprecedented For the question on country recovery and adaptability, the geophysical destruction, with a difference of 0.41 (on a scale of 1 margin of error is heavily dependent on how many people to 5). assessed the country in the question (as explained above, survey respondents could choose which country to assess). The tables in Appendix 3 detail the values. Table 1-2: Legends Region of Residence Stakeholder As Asia Ac Academia E Europe B Business LatAm Latin America G Government NthA North America IO International Organization MENA Middle East/ North Africa N NGO lv The margin of error varies slightly across the 50 risks. See Table 3 in Appendix 2. SSA Sub-Saharan Africa Other Other lvi The margin of error varies across the five categories and the different possible answers. 62 Global Risks 2013
  • 63. Section 1Table 1: Comparisons between Groupslvii for Likelihood of Global Risks Occurring in the Next 10 Yearslviii Risk Region of Residence Stakeholder Age Gender Expertise Under 40 Over 40 Male Female Expert Non-Expert Chronic fiscal imbalances NthA > All other regions - - - 4.02 > 3.91 Chronic labour market imbalances NthA, SSA > E, LatAm - - 3.65 < 3.79 - Extreme volatility in energy and - - - - - Section 2 agriculture prices Hard landing of an emerging economy NthA > E, LatAm, MENA, SSA - - - - As > MENA Major systemic financial failure - - - - - Prolonged infrastructure neglect NthA > All other regions - 3.24 < 3.38 - - Recurring liquidity crises NthA, E, MENA > LatAm - - - - Severe income disparity NthA > As, E, LatAm NGO > G - 4.19 < 4.31 4.15 < 4.29 Unforeseen negative consequences of NthA > LatAm B > NGO, Ac, G, IO - - 3.41 > 3.21 regulation Unmanageable inflation or deflation As > NthA, E, LatAm - 3.25 > 3.11 - 3.12 < 3.24 SSA > LatAm Section 3 Antibiotic-resistant bacteria NthA > As, LatAm Other > IO - - 3.67 > 3.36 E > LatAm Failure of climate change adaptation NthA > As, E, MENA NGO > G 3.69 < 3.81 3.71 < 3.89 4.04 > 3.69 Irremediable pollution - - 3.48 > 3.24 3.25 < 3.6 3.62 > 3.28 Land and waterway use NthA > As, E, MENA NGO > IO - 3.54 < 3.77 3.91 > 3.53 mismanagement Mismanaged urbanization NthA > As, E, MENA - - 3.64 < 3.8 3.9 > 3.64 Persistent extreme weather NthA > As, E, MENA NGO > B - 3.64 < 3.85 4.07 > 3.61 Rising greenhouse gas emissions NthA > All other regions - 3.87 < 4 - 4.28 > 3.86 Species overexploitation NthA > MENA NGO > G - - 4 > 3.6 Unprecedented geophysical destruction As > MENA, E - 3.24 > 3.11 3.06 < 3.47 - Section 4 NthA > E Vulnerability to geomagnetic storms As > E, MENA - - 2.53 < 2.75 - Critical fragile states NthA > As, LatAm - - - - Diffusion of weapons of mass destruction NthA > All other regions - 3.14 < 3.3 - 3.34 > 3.18 Entrenched organized crime NthA, LatAm > As, E - - 3.4 < 3.61 3.57 > 3.41 Failure of diplomatic conflict resolution NthA > As, E, LatAm, SSA All other - - - NthA > As, LatAm stakeholders > G Global governance failure E > As - - - - Militarization of space As > LatAm - - 2.75 < 2.95 - Pervasive entrenched corruption NthA > As, E - - 3.69 < 3.87 - Terrorism NthA > As, LatAm, E - - - - Section 5 Unilateral resource nationalization NthA > MENA, LatAm, SSA - - - - Widespread illicit trade NthA > As, E, LatAm - - 3.38 < 3.57 - Backlash against globalization NthA > LatAm - - 3.18 > 3.04 - Food shortage crises NthA > As, LatAm - - 3.55 < 3.71 3.69 > 3.52 Ineffective illicit drug policies LatAm, NthA > As, E, SSA - - - - E > As Mismanagement of population ageing NthA, E > As, LatAm, SSA, MENA NGO > G - - - Rising rates of chronic disease NthA > As, E, MENA, LatAm - - 3.37 < 3.57 3.52 > 3.36 Rising religious fanaticism NthA > As, E, LatAm - - - 3.59 < 3.71 Unmanaged migration NthA, E > As NGO > G - 3.34 < 3.63 3.5 > 3.36 Unsustainable population growth - - 3.52 > 3.38 3.39 < 3.6 3.53 > 3.37 Section 6 Vulnerability to pandemics NthA > E, MENA, LatAm - - - - As > E Water supply crises - - - 3.78 < 4.01 - Critical systems failure NthA, E, As, SSA > LatAm Ac, Other > IO, - - - NGO Cyber attacks NthA > All other regions Ac, B, NGO > IO - - 4.01 > 3.75 E > SSA Failure of intellectual property regime As, E, NthA > MENA B>G - - 3.13 > 2.96 Massive digital misinformation As > LatAm - - - - Massive incident of data fraud/theft NthA > As, E, LatAm B > IO - - 3.68 > 3.46 Mineral resource supply vulnerability E > LatAm, MENA NGO, B > IO - - - As > MENA Proliferation of orbital debris - Ac > IO - - 2.97 > 2.83 Unforeseen consequences of climate NthA > E Other > IO - 3.17 < 3.36 - change mitigation Unforeseen consequences of - - - 2.71 < 3 2.69 < 2.83 nanotechnology Unforeseen consequences of new life - - - 3.08 < 3.22 - science technologieslvii An analysis of variance (ANOVA) tested whether or not the means of sub-groups were all equal. For those risks where they were not all equal, a Sidak post-hoc test established which of the pair-wise differences between groups were significant at the 5% level.lviii Only statistically significant differences are noted; otherwise, the table cell is empty. Global Risks 2013 63
  • 64. Section 1 Impact: Comparisons In terms of perceived impact, regional differences were found for 48% of the risks, with the most differences found in the environmental category and the least in the economic category (see Table 2). Where there were statistically significant differences, respondents from Latin America perceived 50% ofSection 2 these risks as having higher impact than did respondents from other regions. Apart from the risk mineral resource supply vulnerability, European respondents generally perceived risks as having lower impact. Among stakeholder groups, statistically significant differences were found for less than half the risks, with NGOs perceiving impacts to be higher and businesses lower. There were two exceptions: hard landing of an emerging economy and mismanagement of population ageing.Section 3 Between respondents under and over 40 years of age, there were statistically significant differences for half the risks, with younger respondents perceiving higher impact. The largest difference, 0.32 units, was for irremediable pollution. Male and female opinions differed significantly for 39 out of 50 risks, most obviously in the geopolitical category, with all 10 risks having differences. In all 39 cases, men perceived the impact of the risks as lower, with the largest difference, of 0.43, forSection 4 entrenched organized crime. Fewest statistically significant differences were found between experts and non-experts – only 15 risks, none in the geopolitical category and only one in the technological category. Where there were differences, experts generally rated risks as having a higher impact, except in the case of two risks: severe income disparity and unforeseen consequences of nanotechnology.Section 5Section 6 64 Global Risks 2013
  • 65. Section 1Table 2: Comparisons between Groupslix for Impact of Global Risks if they were to Materializelx Risk Region of Residence Stakeholder Age Gender Expertise Under 40 Over 40 Male Female Expert Non- Expert Chronic fiscal imbalances - - - - 4.03 > 3.92 Chronic labour market imbalances - - 3.86 > 3.62 3.68 < 3.88 - Section 2 Extreme volatility in energy and - - - 3.84 < 3.98 - agriculture prices Hard landing of an emerging economy - B, Ac > G - - - Major systemic financial failure - - 4.1 > 4 - - Prolonged infrastructure neglect NthA > E - - 3.15 < 3.29 - Recurring liquidity crises - - 3.71 > 3.61 3.62 < 3.75 - Severe income disparity SSA > As, E Ac, NGO, Other > B - 3.71 < 4.06 3.72 < 3.89 Unforeseen negative consequences of SSA > E, NthA Other > Ac, IO 3.24 > 3.13 3.12 < 3.33 3.25 > 3.11 regulation As > E Unmanageable inflation or deflation - - 3.63 > 3.52 - - Antibiotic-resistant bacteria - - 3.63 > 3.51 - - Section 3 Failure of climate change adaptation - NGO > B - 3.8 < 4.16 4.17 > 3.84 Irremediable pollution LatAm > E, NthA - 3.82 > 3.5 3.55 < 3.92 - Land and waterway use LatAm > As, E NGO > Ac, B 3.66 > 3.5 3.47 < 3.83 3.72 > 3.54 mismanagement Mismanaged urbanization LatAm > E NGO, Other > B - 3.31 < 3.59 3.6 > 3.33 Persistent extreme weather NthA, LatAm > E NGO > B - 3.56 < 3.87 3.95 > 3.57 Rising greenhouse gas emissions NthA > As NGO > B, G - 3.82 < 4.04 4.23 > 3.8 Species overexploitation - NGO > B - 3.29 < 3.55 3.72 > 3.27 Unprecedented geophysical destruction NthA, LatAm, As > E - 3.45 > 3.24 3.25 < 3.55 - Vulnerability to geomagnetic storms LatAm > NthA, E, As - - - - Critical fragile states - - 3.61 > 3.46 3.5 < 3.63 - Section 4 Diffusion of weapons of mass destruction NthA > As - - 3.86 < 4.07 - Entrenched organized crime LatAm > As, E, NthA IO, NGO > B 3.3 > 3.13 3.09 < 3.52 - Failure of diplomatic conflict resolution - - - 3.64 < 3.81 - Global governance failure - Other > B - 3.74 < 3.92 - Militarization of space - - 3.24 > 3.1 3.1 < 3.33 - Pervasive entrenched corruption LatAm > As, E NGO > Ac, B, G 3.57 > 3.38 3.38 < 3.69 - SSA > E Other > B Terrorism NthA, As, MENA > E - 3.67 > 3.52 3.5 < 3.82 - Unilateral resource nationalization - NGO > IO - 3.36 < 3.53 - Widespread illicit trade MENA > As, E, NthA NGO > Ac, B - 2.91 < 3.33 - Section 5 LatAm > As, E SSA > E Backlash against globalization - - - - - Food shortage crises - - 3.94 > 3.73 3.76 < 4.01 - Ineffective illicit drug policies LatAm > All other regions NGO > B - 2.95 < 3.25 3.14 > 2.94 Mismanagement of population ageing - NGO, B > G - - - Rising rates of chronic disease LatAm, NthA > E - 3.42 > 3.28 3.25 < 3.58 3.44 > 3.27 Rising religious fanaticism NthA > E, As - - 3.59 < 3.76 - Unmanaged migration - NGO > B - 3.27 < 3.69 3.49 > 3.3 Unsustainable population growth - - 3.78 > 3.64 3.63 < 3.91 3.8 > 3.63 Vulnerability to pandemics NthA > E - 3.68 > 3.54 3.56 < 3.71 - Section 6 Water supply crises LatAm > E, As - 4.12 > 3.87 3.89 < 4.22 4.05 > 3.93 Critical systems failure - - 3.74 > 3.52 - - Cyber attacks - - - 3.47 < 3.63 - Failure of intellectual property regime - - 3.05 > 2.94 - - Massive digital misinformation MENA > E, NthA - 3.36 > 3.15 3.15 < 3.48 - Massive incident of data fraud/theft MENA, LatAm > E - 3.34 > 3.21 3.2 < 3.46 - Mineral resource supply vulnerability E > NthA NGO > IO - - - Proliferation of orbital debris LatAm, As > NthA NGO > B, IO - 2.73 < 2.96 - Other > IO Unforeseen consequences of climate - Other > B - 3.27 < 3.57 - change mitigation Unforeseen consequences of - NGO > B, IO 3.09 > 2.91 2.9 < 3.23 2.84 < 3.04 nanotechnology Unforeseen consequences of new life - NGO > IO 3.43 > 3.3 3.29 < 3.53 - science technologieslix An analysis of variance (ANOVA) tested whether or not the means of sub-groups were all equal. For those risks where they were not all equal, a Sidak post-hoc test established which of the pair-wise differences between groups were significant at the 5% level.lx Only statistically significant differences are noted; otherwise, the table cell is left empty. Global Risks 2013 65
  • 66. Section 1 Likelihood and Impact – Average Scores and Margin of Error Appendix 3 Resilience The table below shows the average likelihood and impact scores and their margins of error (based on a 95% confidence level). The larger the margin of error, the lower the confidence that theSection 2 result is close to the “true” figure of the whole survey populations (see Appendix 1). Table 3: Average Likelihood and Impact Scores and their Margin of Error Risk Likelihood Impact Chronic fiscal imbalances 3.97 +/- 0.05 3.97 +/- 0.05 Chronic labour market imbalances 3.69 +/- 0.05 3.73 +/- 0.05 Extreme volatility in energy and agriculture prices 3.71 +/- 0.05 3.88 +/- 0.05 Hard landing of an emerging economy 3.46 +/- 0.05 3.49 +/- 0.05 Appendix 3.1Section 3 Major systemic financial failure 3.44 +/- 0.06 4.04 +/- 0.05 Prolonged infrastructure neglect 3.32 +/- 0.06 3.19 +/- 0.05 Over 14,000 respondents to the World Economic Forum’s Recurring liquidity crises 3.36 +/- 0.05 3.66 +/- 0.05 Executive Opinion Surveylxi were asked to rate their Severe income disparity 4.22 +/- 0.05 3.8 +/- 0.05 government’s risk management effectiveness: Unforeseen negative consequences of regulation 3.31 +/- 0.06 3.18 +/- 0.06 Unmanageable inflation or deflation 3.18 +/- 0.05 3.57 +/- 0.05 How would you assess your national government’s overall Antibiotic-resistant bacteria 3.42 +/- 0.06 3.57 +/- 0.06 risk management effectiveness of monitoring, preparing for, Failure of climate change adaptation 3.76 +/- 0.06 3.9 +/- 0.06 responding to and mitigating against major global risks (e.g. Irremediable pollution 3.35 +/- 0.06 3.65 +/- 0.06 financial crisis, natural disasters, climate change, Land and waterway use mismanagement 3.61 +/- 0.06 3.57 +/- 0.05 pandemics, etc.)? (1 = Not effective in managing majorSection 4 Mismanaged urbanization 3.69 +/- 0.06 3.39 +/- 0.06 global risks; 7 = Effective in managing major global risks) Persistent extreme weather 3.7 +/- 0.06 3.65 +/- 0.06 Rising greenhouse gas emissions 3.94 +/- 0.05 3.88 +/- 0.05 Table 4 provides the average results for each country, ranked Species overexploitation 3.68 +/- 0.06 3.36 +/- 0.06 from highest (best) to lowest (worst). Singapore and many Unprecedented geophysical destruction 3.17 +/- 0.06 3.33 +/- 0.06 innovation-driven economies (Stage 3 in the Forum’s Global Vulnerability to geomagnetic storms 2.59 +/- 0.06 3.16 +/- 0.06 Competitiveness Index) are ranked higher than factor-driven Critical fragile states 3.38 +/- 0.06 3.53 +/- 0.05 (Stage 1) economies (for definitions of stages, see page 68). The Diffusion of weapons of mass destruction 3.23 +/- 0.06 3.92 +/- 0.06 table also gives the survey sample size and the margin of error Entrenched organized crime 3.46 +/- 0.06 3.21 +/- 0.06 for each country, its ISO code, and development stage. Failure of diplomatic conflict resolution 3.58 +/- 0.06 3.69 +/- 0.05 Countries marked in light blue were used for the preliminarySection 5 Global governance failure 3.69 +/- 0.06 3.79 +/- 0.05 analysis presented in the Special Report section; the selection Militarization of space 2.81 +/- 0.06 3.16 +/- 0.06 criterion was the available sample size from the Global Risks Pervasive entrenched corruption 3.74 +/- 0.06 3.47 +/- 0.06 Perception Survey (see Table 5). Terrorism 3.64 +/- 0.06 3.59 +/- 0.06 Unilateral resource nationalization 3.35 +/- 0.06 3.4 +/- 0.06 Widespread illicit trade 3.43 +/- 0.06 3.03 +/- 0.06 Backlash against globalization 3.14 +/- 0.06 3.34 +/- 0.06 Food shortage crises 3.6 +/- 0.06 3.83 +/- 0.06 Ineffective illicit drug policies 3.41 +/- 0.06 3.03 +/- 0.06 Mismanagement of population ageing 3.83 +/- 0.05 3.67 +/- 0.05Section 6 Rising rates of chronic disease 3.43 +/- 0.06 3.35 +/- 0.05 Rising religious fanaticism 3.66 +/- 0.06 3.64 +/- 0.06 Unmanaged migration 3.42 +/- 0.06 3.39 +/- 0.06 Unsustainable population growth 3.45 +/- 0.06 3.71 +/- 0.06 Vulnerability to pandemics 3.2 +/- 0.06 3.6 +/- 0.06 Water supply crises 3.85 +/- 0.05 3.98 +/- 0.05 Critical systems failure 2.96 +/- 0.06 3.62 +/- 0.06 Cyber attacks 3.82 +/- 0.06 3.52 +/- 0.06 Failure of intellectual property regime 3 +/- 0.06 2.99 +/- 0.06 Massive digital misinformation 3.36 +/- 0.07 3.24 +/- 0.06 Massive incident of data fraud/theft 3.52 +/- 0.06 3.27 +/- 0.06 Mineral resource supply vulnerability 3.42 +/- 0.06 3.45 +/- 0.06 Proliferation of orbital debris 2.87 +/- 0.06 2.8 +/- 0.06 Unforeseen consequences of climate change 3.23 +/- 0.06 3.35 +/- 0.06 mitigation Unforeseen consequences of nanotechnology 2.79 +/- 0.06 2.99 +/- 0.06 Unforeseen consequences of new life science 3.11 +/- 0.06 3.36 +/- 0.06 lxi technologies The Executive Opinion Survey is the Forum’s flagship opinion poll that is conducted every year to sample the perception of top managers from small- and medium-sized firms on the economies in which they are operating. 66 Global Risks 2013
  • 67. Section 1Table 4: Executive Opinion Survey Question 2.07 RiskManagement Effectiveness Resultslxii Risk Management Risk Management Margin of Error at Margin of Error at 95% Confidence 95% Confidence Development Development Economic Economic Country Country Sample Sample Score Score Stage Stage Section 2 Level LevelRank Rank ISO ISO 1 Singapore SGP Stage 3 171 6.08 0.11 55 Tajikistan TJK Stage 1 97 3.91 0.35 2 Qatar QAT Transition from 1 to 2 113 6.01 0.18 56 Macedonia, FYR MKD Stage 2 86 3.90 0.35 3 Oman OMN Transition from 2 to 3 75 5.55 0.26 57 Poland POL Transition from 2 to 3 205 3.87 0.19 4 United Arab ARE Stage 3 163 5.47 0.17 58 Czech Republic CZE Stage 3 159 3.87 0.25 Emirates 59 Peru PER Stage 2 83 3.83 0.31 5 Canada CAN Stage 3 101 5.41 0.20 60 Ethiopia ETH Stage 1 57 3.83 0.34 6 Sweden SWE Stage 3 76 5.41 0.28 61 Uruguay URY Transition from 2 to 3 80 3.80 0.33 7 Saudi Arabia SAU Transition from 1 to 2 94 5.41 0.29 62 Austria AUT Stage 3 105 3.80 0.29 8 New Zealand NZL Stage 3 52 5.40 0.24 Section 3 63 Cape Verde CPV Stage 2 103 3.75 0.27 9 Finland FIN Stage 3 36 5.32 0.43 64 Lithuania LTU Transition from 2 to 3 148 3.74 0.25 10 Chile CHL Transition from 2 to 3 78 5.20 0.29 65 Ireland IRL Stage 3 60 3.70 0.34 11 Norway NOR Stage 3 74 5.15 0.24 66 Philippines PHL Transition from 1 to 2 126 3.69 0.25 12 Mexico MEX Transition from 2 to 3 268 5.13 0.15 67 Japan JPN Stage 3 111 3.67 0.28 13 Netherlands NLD Stage 3 81 5.06 0.25 68 Armenia ARM Stage 2 77 3.65 0.28 14 Malaysia MYS Transition from 2 to 3 78 4.97 0.25 69 Burkina Faso BFA Stage 1 39 3.64 0.46 15 Hong Kong SAR HKG Stage 3 68 4.96 0.35 70 Benin BEN Stage 1 81 3.62 0.40 16 Kazakhstan KAZ Transition from 2 to 3 100 4.93 0.35 71 Guinea GIN Stage 1 57 3.61 0.44 17 Germany DEU Stage 3 127 4.90 0.25 72 Namibia NAM Stage 2 81 3.60 0.32 18 Turkey TUR Transition from 2 to 3 84 4.83 0.28 Section 4 73 Russian RUS Transition from 2 to 3 413 3.60 0.14 19 Switzerland CHE Stage 3 77 4.82 0.32 Federation 20 United Kingdom GBR Stage 3 102 4.81 0.28 74 Iceland ISL Stage 3 92 3.58 0.31 21 Botswana BWA Transition from 1 to 2 78 4.80 0.27 75 Iran, Islamic Rep. IRN Transition from 1 to 2 560 3.57 0.13 22 Gambia, The GMB Stage 1 84 4.78 0.26 76 Nicaragua NIC Stage 1 77 3.57 0.25 23 Taiwan, China TWN Stage 3 70 4.75 0.26 77 Zambia ZMB Stage 1 88 3.57 0.33 24 Brunei BRN Transition from 1 to 2 41 4.75 0.39 78 Mozambique MOZ Stage 1 87 3.56 0.35 Darussalam 79 Liberia LBR Stage 1 84 3.56 0.31 25 Luxembourg LUX Stage 3 44 4.65 0.43 80 Jamaica JAM Stage 2 75 3.53 0.30 26 Azerbaijan AZE Transition from 1 to 2 89 4.63 0.30 81 Ghana GHA Stage 1 77 3.53 0.31 27 Mauritius MUS Stage 2 91 4.58 0.31 82 Bolivia BOL Transition from 1 to 2 71 3.52 0.27 Section 5 28 Estonia EST Transition from 2 to 3 82 4.54 0.31 83 Côte dIvoire CIV Stage 1 91 3.46 0.30 29 United States USA Stage 3 390 4.53 0.14 84 Costa Rica CRI Stage 2 94 3.44 0.27 30 China CHN Stage 2 369 4.51 0.13 85 Colombia COL Stage 2 281 3.43 0.17 31 France FRA Stage 3 128 4.51 0.27 86 Vietnam VNM Stage 1 94 3.40 0.30 32 Australia AUS Stage 3 67 4.49 0.41 87 Timor-Leste TLS Stage 2 33 3.39 0.61 33 Bahrain BHR Transition from 2 to 3 63 4.47 0.38 88 Dominican DOM Stage 2 90 3.38 0.32 34 South Africa ZAF Stage 2 45 4.42 0.38 Republic 35 Malta MLT Stage 3 57 4.36 0.44 89 Senegal SEN Stage 1 91 3.35 0.33 36 Gabon GAB Transition from 1 to 2 48 4.34 0.36 90 Libya LBY Transition from 1 to 2 68 3.33 0.40 37 Morocco MAR Stage 2 40 4.33 0.45 91 Mongolia MNG Transition from 1 to 2 82 3.27 0.31 Section 6 38 India IND Stage 1 119 4.31 0.27 92 Bulgaria BGR Stage 2 119 3.26 0.24 39 Italy ITA Stage 3 86 4.24 0.32 93 Latvia LVA Transition from 2 to 3 98 3.24 0.29 40 Barbados BRB Transition from 2 to 3 69 4.24 0.34 94 Bosnia and BIH Stage 2 100 3.22 0.24 41 Korea, Rep. KOR Stage 3 98 4.23 0.25 Herzegovina 42 Montenegro MNE Stage 2 74 4.20 0.35 95 Cameroon CMR Stage 1 61 3.21 0.36 43 Seychelles SYC Transition from 2 to 3 32 4.20 0.51 96 Trinidad and TTO Transition from 2 to 3 149 3.21 0.23 Tobago 44 Israel ISR Stage 3 50 4.19 0.40 97 Suriname SUR Stage 2 36 3.17 0.37 45 Brazil BRA Transition from 2 to 3 141 4.16 0.23 98 Slovak Republic SVK Stage 3 65 3.11 0.33 46 Panama PAN Stage 2 132 4.15 0.20 99 Mali MLI Stage 1 99 3.06 0.35 47 Denmark DNK Stage 3 128 4.10 0.28 100 Malawi MWI Stage 1 60 3.05 0.38 48 Cambodia KHM Stage 1 73 4.09 0.33 101 Nigeria NGA Stage 1 102 3.05 0.31 49 Indonesia IDN Stage 2 88 4.08 0.32 102 Guatemala GTM Stage 2 83 3.04 0.29 50 Belgium BEL Stage 3 83 4.07 0.36 103 Hungary HUN Transition from 2 to 3 103 3.03 0.32 51 Portugal PRT Stage 3 114 4.06 0.25 104 Bangladesh BGD Stage 1 84 3.03 0.31 52 Puerto Rico PRI Stage 3 70 4.05 0.40 105 Egypt EGY Transition from 1 to 2 73 3.02 0.33 53 Spain ESP Stage 3 90 4.03 0.36 106 Guyana GUY Stage 2 89 3.02 0.31 54 Jordan JOR Stage 2 155 3.92 0.24 107 Croatia HRV Transition from 2 to 3 107 3.00 0.23lxii Countries highlighted had sufficient sample sizes based on responses for the Global Risks Perception Survey. Table continued on next page Global Risks 2013 67
  • 68. Section 1 Meanwhile, respondents to the Global Risks Perception Survey Risk Management Margin of Error at were asked, per risk, about their country of expertise’s ability to 95% Confidence adapt and or recover from its impact: Development Economic Country Sample “What would be your country’s capability to adapt and or Score Stage Level Rank ISO recover from the national impact of this global risk?”Section 2 108 Uganda UGA Stage 1 87 2.99 0.30 109 Thailand THA Stage 2 75 2.98 0.37 Table 5 ranks the countries from the highest to lowest according 110 Cyprus CYP Stage 3 78 2.97 0.30 to their adaptability/ recoverability score. As with the Executive 111 Mauritania MRT Stage 1 78 2.97 0.37 Opinion Survey risk-management question results, Singapore 112 Kenya KEN Stage 1 109 2.93 0.31 again and many Stage 3, innovation-driven economies are 113 Moldova MDA Stage 1 112 2.93 0.25 ranked higher than Stage 1, factor-driven economies. Additional 114 Tanzania TZA Stage 1 97 2.90 0.29 details about the survey sample size for each country and its 115 Lesotho LSO Stage 1 80 2.87 0.34 economic development stage are also provided in the table. Analysing the countries in table 5 in terms of their economic 116 Slovenia SVN Stage 3 109 2.84 0.28 development stage presents an interesting way to group 117 Kuwait KWT Transition from 1 to 2 37 2.81 0.62 countries and tests whether this is the best method to do so.lxiii InSection 3 118 Serbia SRB Stage 2 99 2.81 0.31 the Global Competitiveness Report 2012-2013, the economic 119 Ukraine UKR Stage 2 108 2.65 0.27 development stages are as defined below: 120 Nepal NPL Stage 1 91 2.64 0.28 121 Algeria DZA Transition from 1 to 2 33 2.64 0.57 -- Economies in the first stage are mainly factor-driven and 122 Sierra Leone SLE Stage 1 99 2.59 0.31 compete based on their factor endowments—primarily 123 Romania ROU Stage 2 98 2.53 0.27 low-skilled labour and natural resources. 124 Swaziland SWZ Stage 2 50 2.52 0.39 -- Transition from stage 1 to stage 2 125 Chad TCD Stage 1 103 2.49 0.27 -- Economies in the second stage have moved into an 126 Pakistan PAK Stage 1 106 2.47 0.24 efficiency-driven stage of development, when they must 127 Zimbabwe ZWE Stage 1 63 2.46 0.28 begin to develop more efficient production processes andSection 4 128 Honduras HND Transition from 1 to 2 85 2.43 0.27 increase product quality because wages have risen and they 129 Lebanon LBN Transition from 2 to 3 38 2.42 0.39 cannot increase prices. 130 Madagascar MDG Stage 1 88 2.40 0.21 -- Transition from stage 2 to stage 3 131 Paraguay PRY Stage 2 78 2.29 0.26 132 El Salvador SLV Stage 2 34 2.28 0.41 -- Economies in stage 3 have moved into the innovation-driven 133 Kyrgyz Republic KGZ Stage 1 96 2.21 0.26 stage, wages will have risen by so much that they are able to sustain those higher wages and the associated standard of 134 Burundi BDI Stage 1 90 2.18 0.21 living only if their businesses are able to compete with new 135 Haiti HTI Stage 1 66 2.16 0.29 and/or unique products, services, models, and processes. 136 Greece GRC Stage 3 78 2.12 0.23 137 Yemen YEM Stage 1 52 2.12 0.35 Countries highlighted in blue were used for the preliminarySection 5 138 Argentina ARG Transition from 2 to 3 96 2.08 0.25 analysis presented in the Special Report section. The selection 139 Venezuela VEN Transition from 1 to 2 38 1.68 0.28 criterion was the sufficiency of the country sample size to guarantee a margin of error smaller than 0.5 units (equal to a 95% confidence interval of less than one unit). 66 countries were not included below as the sample size was smaller than 5.lxivSection 6 lxiii The economic development stage groupings are the best data currently available for this report. Further analysis will investigate other potential groups, for example, GDP per capita or income level. lxiv Margin of errors can still be large for the countries with small sample sizes listed in Table 5 and therefore were not included in the detailed analysis. 68 Global Risks 2013
  • 69. Section 1Table 5: Global Risks Perception Survey Resilience Question Appendix 3.2Results As presented in the Special Report section, a country system is *by country of expertise Margin of Error at 95% Confidence assessed using five components of resilience: robustness, Recoverability Development redundancy, resourcefulness, response and recovery. Each Adaptability/ Economic component is further defined by key attributes, and for each of Country Sample these attributes, potential qualitativelxv and quantitative indicators Score Stage Section 2 LevelRank have been identified (see Table 6).1 Singapore Stage 3 10 3.66 0.932 Norway Stage 3 6 3.56 1.62 Table 6: Potential Indicators for Resilience Componentslxvi3 Sweden Stage 3 8 3.46 1.074 Switzerland Stage 3 32 3.37 0.43 Components Quantitative Component Robustness Resilience Indicators Indicators Attributes Executive5 United Arab Stage 3 11 3.28 1.01 Potential Potential Opinion Survey Emirates6 Canada Stage 3 18 3.27 0.637 Peoples Republic Stage 2 72 3.26 0.25 Monitoring Quality of natural Logistics Performance Index from the of China system environment World Bank Section 38 Chile Transition from 2 to 3 6 3.24 1.71 health Quality of9 USA Stage 3 283 3.23 0.12 healthcare system10 Denmark Stage 3 8 3.21 1.20 Quality of overall infrastructure11 Netherlands Stage 3 20 3.19 0.51 Quality of12 Germany Stage 3 40 3.19 0.36 education system13 Israel Stage 3 8 3.16 1.26 Modularity State cluster Economic Freedom of the World Index14 Australia Stage 3 13 3.15 0.76 development from Gwartney, J., Lawson, R., & Clark,15 Belgium Stage 3 7 3.15 1.35 J. R. Economic Freedom of the world, 2012.16 Japan Stage 3 60 3.07 0.29 Adaptive Willingness to Index of Economic Freedom from 201217 Brazil Transition from 2 to 3 35 3.01 0.44 decision- delegate authority Index of Economic Freedom, the Section 418 South Korea Stage 3 6 2.96 1.32 making Heritage Foundation.19 United Kingdom Stage 3 64 2.95 0.29 models Redundancy Quantity of local Reserves Redundancy20 Mexico Transition from 2 to 3 25 2.93 0.52 of critical suppliers Renewable freshwater resources21 Indonesia Stage 2 9 2.9 1.08 infrastruc- Density of physicians from World Health22 Saudi Arabia Transition from 1 to 2 9 2.87 1.21 ture Statistics, World Health Organization.23 Poland Transition from 2 to 3 14 2.86 0.74 Diversity of Value chain Environmental Performance Index24 Tunisia Stage 2 16 2.85 0.77 solutions breadth (Ecosystem Vitality) from Environmental and strategy Performance Index, Yale University.25 Russian Federation Transition from 2 to 3 35 2.84 0.48 Capacity for Accessibility of Education Index from International Resourcefulness26 France Stage 3 6 2.81 1.63 self- digital content Human Development Indicators, United27 Vietnam Stage 1 13 2.79 0.77 organization Extent to which Nations Development Programme. Section 528 South Africa Stage 2 25 2.77 0.57 virtual social29 Thailand Stage 2 6 2.75 1.51 networks are used30 Costa Rica Stage 2 11 2.74 0.97 Creativity Latest Research and development expenditure and technologies as a percentage of gross domestic31 Peru Stage 2 6 2.73 1.65 innovation production from World Development32 India Stage 1 64 2.71 0.28 Indicators, the World Bank.33 Panama Stage 2 13 2.67 0.95 Communi- Public trust in Media Sustainability Index from IREX. Response34 Italy Stage 3 31 2.67 0.40 cation politicians35 Malaysia Transition from 2 to 3 10 2.64 0.80 Inclusive Business- Business regulatory environment participation government Structural policies cluster from Country36 Turkey Transition from 2 to 3 11 2.61 0.95 relations Policy and Institutional Assessment, the37 Ukraine Stage 2 11 2.54 0.99 World Bank. Section 638 Kuwait Transition from 1 to 2 7 2.52 1.48 Responsive Reform Actionable Governance Indicators from Recovery39 Egypt Transition from 1 to 2 10 2.47 0.89 regulatory implementation Actionable Governance Indicators Data feedback efficiency Portal, the World Bank.40 Mauritius Stage 2 9 2.46 1.01 mechanisms41 Argentina Transition from 2 to 3 6 2.46 1.41 Active Collaboration Some studies have suggested potential42 Dominican Stage 2 5 2.44 1.94 “horizon within clusters quantitative data for this attribute including Republic scanning” developing public-private partnerships for43 Spain Stage 3 9 2.4 1.10 Research and Development and44 Philippines Transition from 1 to 2 9 2.4 0.89 Innovation and promoting centres and networks of excellence, regional research45 Pakistan Stage 1 10 2.37 1.17 driven clusters and innovation poles46 Colombia Stage 2 7 2.34 1.20 (Manjón, J. & Vicente J. A Proposal of47 Jordan Stage 2 7 2.23 1.48 Indicators and Policy Framework for48 Nigeria Stage 1 16 2.21 0.66 Innovation Benchmark in Europe. In Journal of Technology Management and49 Ethiopia Stage 1 7 2.08 1.41 Innovation, 2010, 5:13-23.) Table 7 shows the questions identified in the Executive Opinion Survey that are potential variables for the Country Resilience framework described in the Special Report section of this report. lxv See Table 7 for detailed questions for each of the qualitative indicators. lxvi These potential indicators are still work in progress. Further development, research and refinement will be conducted in the coming year. Global Risks 2013 69
  • 70. Section 1 Table 7: Executive Opinion Survey Questions Appendix 3.3 Question Variable Name Executive Opinion Survey Question As explained in the Special Report, 10 countries were identified 0208 Business- How would you characterize business-government that had a margin of error of less than 0.5: Brazil, China, government relations in your country? (1 = Generally Germany, India, Italy, Japan, Russia, Switzerland, United relations confrontational; 7 = Generally cooperative ) Kingdom and United States. Statistical analysislxvii was 0304 Public trust of How would you rate the level of public trust in the conducted to identify paired differences between groups for theSection 2 politicians ethical standards of politicians in your country? (1 = Very low; 7 = Very high) 10 countries, regionslxviii and economic development stages.lxix 0305 Reform In your country, to what extent are government implementation reforms implemented efficiently? (1 = Reforms are Generally, respondents from Stage 3, innovation-driven efficiency never implemented; 7 = Reforms are implemented economies had greater confidence that their country will be able highly efficiently) to adapt and/or recover from the impact of a global risk. 0306 Politicians ability In your country, how you would rate the ability of Respondents from Stage 1, factor-driven economies, were more to govern politicians to govern effectively? (1 = Very weak; 7 = Very strong) pessimistic. Most interestingly, in the societal category, we found 0308 Wastefulness of How would you rate the composition of public spending the only risk that had no statistically significant difference, government in your country? (1 = Extremely wasteful; 7 = Highly mismanagement of population ageing, and the only risk where spending efficient in providing necessary goods and services ) Stage 2, efficiency-driven economies were more optimistic thanSection 3 0510 Government To what extent does the government in your country Stage 3 economies was rising religious fanaticism. provision of services continuously improve its provision of services to help for improved business businesses in your country boost their economic Following similar patterns, North Americans generally had performance performance? (1 = Not at all; 7 = Extensively) 0401 Quality of overall How would you assess general infrastructure (e.g. greater confidence, while Sub-Saharan Africans had less. infrastructure transport, telephony and energy) in your country? (1 Statistically significant differences between countries were found = Extremely underdeveloped; 7 = Extensive and for all risks, other than the two risks hard landing of an emerging efficient by international standards) economy and species overexploitation. Depending on the 0501 Availability of latest To what extent are the latest technologies available in category and sometimes the risk, different countries were seen technologies your country? (1 = Not available; 7 = Widely available) to have comparatively higher ability to adapt and/or recover from 0507 Collaborations In your country, how extensive is collaboration among firms the impact of the risks. For the economic and environmental within clusters (e.g. suppliers, competitors, clients) in order to promoteSection 4 knowledge flows and innovation? (1 = Collaboration is categories, it was Switzerland; for the geopolitical, it was China; non-existent; 7 = Collaboration is extensive) for the technological, it was the United States; and for the 0524 Accessibility of In your country, how accessible is digital content (e.g. societal category, there was no one particular country. digital content text and audio-visual content, software products) via multiple platforms (e.g. fixed-line Internet, wireless Across 50 global risks, where there are statistically significant Internet, mobile network, satellite)? (1 = Not accessible at all; 7 = Widely accessible) differences (56% of the risks for age and 44% of the risks for 0525 Extent of virtual How widely used are virtual social networks (e.g. gender), respondents under 40 years of age and female social networks Facebook, Twitter, LinkedIn) for professional and respondents rate their country as having less ability to adapt use personal communications in your country? (1 = Not and/or recover from the impact of the risk. The majority of risks used at all; 7 = Used widely) that had no statistically significant differences were from the 0803 Local supplier How numerous are local suppliers in your country? (1 geopolitical and technological category for gender and theSection 5 quantity = Largely non-existent; 7 = Very numerous) environmental category for age. The largest differences in 0809 State of cluster In your country, how prevalent are well-developed and development deep clusters (geographic concentrations of firms, opinion were found on the unsustainable population growth and suppliers, producers of related products and services, water supply crises. and specialized institutions in a particular field)? (1 = Non-existent; 7 = Widespread in many fields) With regards to perceptions of experts versus non-experts, 0902 Value chain In your country, do exporting companies have a narrow unlike with likelihood and impact, for this group statistically breadth or broad presence in the value chain? (1 = Narrow, primarily involved in individual steps of the value chain significant differences were found only in the societal and (e.g., resource extraction or production); 7 = Broad, technological category. Self-identified societal experts were present across the entire value chain (i.e. do not only more pessimistic about our recovery from societal risks, while produce but also perform product design, marketing self-identified technological experts were more optimistic aboutSection 6 sales, logistics and after-sales services)) our recovery from technological risks. 0910 Willingness to In your country, how do you assess the willingness to delegate authority delegate authority to subordinates? (1 = Not willing – top management controls all important decisions; 7 = Very willing – authority is mostly delegated to business unit heads and other lower-level managers) 1001 Quality of the How well does the educational system in your educational country meet the needs of a competitive economy? system (1 = Not well at all; 7 = Very well) 1102 Measures to In your country, how effective are the government’s combat corruption efforts to combat corruption and bribery? (1 = Not and bribery effective at all; 7 = Extremely effective) 1303 Quality of natural How would you assess the quality of the natural environment environment in your country? (1 = Extremely poor; 7 = Among the world’s most pristine) 1401 Quality of How would you assess the quality of healthcare healthcare (public and private) provided for ordinary citizens in services your country? (1 = Very poor; 7 = Excellent, among lxvii An analysis of variance (ANOVA) tested whether or not the means of sub-groups were all the best healthcare delivery systems of the world) equal. For those risks where they were not all equal, a Sidak post-hoc test established which of the pair-wise differences between groups were significant at the 5% level. lxviii The whole survey sample was used. lxix The whole survey sample was used and grouped according to their economic development stages as identified by the Global Competitiveness Report. 70 Global Risks 2013
  • 71. Section 1Table 8: Comparisons between Groupslxx for a Country’s Ability to Adapt and/or Recover from the Impact of Global Riskslxxi Country of Expertise Region of Eexpertise Economic Development Stakeholder Stages Brazil BRA Asia A Stage 3 S3 Academia A China CHN Europe E Transition from 2 to 3 T2.5 Business B Section 2 Germany DEU Latin America LA Stage 2 S2 Government G India IND North America NA Transition from 1 to 2 T1.5 International Organization IO Italy ITA Middle East/ North Africa MENA Stage 1 S1 NGO N Japan JPN Sub-Saharan Africa SSA Other Other Russia RUS Switzerland CHE United Kingdom GBR United States USA Section 3 Risk Country of Expertise Region of Economic Stakeholder Age Gender Expertise *only for the 10 identified Expertise Development countries Stages Under Over Male Female Expert Non- 40 40 Expert Chronic fiscal CHE > GBR, IND, - T2.5 > S1, T1.5, S3 - 2.91 < 3.11 3.06 > 2.91 - imbalances ITA, JPN, USA S2, S3 > S1 CHN > GBR, ITA, JPN, USA Section 4 DEU, BRA > JPN Chronic labour CHE > GBR, IND, LA, A, E, NA > SSA T2.5, S3 > S1, T1.5 - 2.86 < 3.09 3.04 > 2.86 - market ITA, JPN, USA S2 > S1 imbalances CHN > IND, ITA, USA DEU, BRA, USA > ITA Extreme volatility CHN, USA > GBR, NA > E, A, LA, SSA S3 > S1, T1.5, S2 - 2.93 < 3.06 - - in energy and IND, JPN MENA, E, A, LA > S2, T2.5 > S1 agriculture prices BRA > IND, JPN SSA CHE, DEU > JPN Hard landing of - NA > E, SSA S3 > All other - - - - an emerging stages Section 5 economy S2 > S1 Major systemic CHN > GBR, RUS NA, A > E S2, T2.5, S3 > S1 B, G > IO 2.85 < 3.01 2.98 > 2.83 - financial failure USA > GBR Prolonged CHE, CHN > BRA, A > LA, SSA S3 > S1, T1.5, T2.5 - 2.92 < 3.06 3.06 > 2.85 - infrastructure GBR, IND, ITA, RUS, E, NA > SSA S2 > S1, T1.5 neglect USA T2.5 > S1 DEU, JPN > BRA, GBR, IND, ITA, RUS USA > IND Recurring liquidity CHN > GBR, ITA A > E, SSA S2, T2.5, S3 > T1.5, G > IO, N 2.92 < 3.17 3.11 > 2.91 - crises CHE, USA > ITA NA > SSA S1 Section 6 Severe income DEU > GBR, IND, E > LA, SSA S3 > All other B>N 2.7 < 2.89 2.87 > 2.64 - disparity RUS, USA MENA, NA, A > stages CHE, JPN > IND SSA S2, T2.5 > S1 Unforeseen CHE, CHN > IND, NA > SSA S3 > S1, T1.5, T2.5 A, B > IO 2.85 < 3.02 2.98 > 2.84 - negative ITA, RUS S2 > S1, T1.5 consequences of DEU, USA > ITA regulation Unmanageable CHN, USA > IND NA > SSA S3 > S1, T1.5, S2 G > IO 2.86 < 3.06 3.01 > 2.84 - inflation or deflation S2, T2.5 > S1, T1.5 Antibiotic- CHE, JPN, USA > A, E, NA > LA, SSA S3 > All - - - - resistant bacteria BRA, IND, RUS MENA > SSA S2, T2.5 > S1 Failure of climate CHE, CHN, DEU, A, E, NA > SSA S3 > S1, T1.5 - - - - change JPN, USA > IND S2, T2.5 > S1 adaptation Irremediable CHE > CHN, IND, ITA NA > SSA, LA S3 > All other - 2.81 < 2.97 2.96 > 2.73 - pollution GBR, JPN, USA > A, E > SSA stages IND, ITA T2.5 > S1, T1.5 DEU > IND S2 > S1lxx An analysis of variance (ANOVA) tested whether or not the means of sub-groups are all equal; for those that were not all equal, a Sidak post-hoc test was then conducted to establish which of the pair-wise differences between groups are significant at the 5% level.lxxi Only statistically significant differences are noted; otherwise, the table cell is left empty. Global Risks 2013 71
  • 72. Section 1 Land and CHE > CHN, IND, NA > SSA, LA S3 > All other - 2.85 < 3.01 3.02 > 2.74 - waterway use ITA, RUS A, E > SSA stages mismanagement JPN > IND, ITA T2.5 > S1, T1.5 BRA, DEU, GBR, S2 > S1 USA > IND Mismanaged CHE > BRA, CHN, E > A, MENA, SSA, S3 > All other - - 3.12 > 2.93 - urbanization IND, RUS LA stagesSection 2 DEU, JPN > BRA, A, NA > SSA, LA S2 > S1, T1.5 IND, RUS T2.5 > S1 CHN, GBR, USA > BRA, IND ITA > IND Persistent CHE > BRA, IND, ITA NA, E > SSA, LA S3 > All other - - 2.98 > 2.80 - extreme weather DEU, JPN > IND, ITA A > SSA stages CHN, GBR, USA > S2, T2.5 > S1 IND Rising CHN, JPN > GBR, - S2, T2.5, S3 > S1, - - - - greenhouse gas IND, USA T1.5 emissions BRA, CHE, DEU >Section 3 IND Species - - S3 > S1, T1.5 - - - - overexploitation T2.5 > T1.5 Unprecedented CHN, DEU > ITA NA > MENA, LA, E, S3 > S1, T1.5, S2 A, B > IO - - - geophysical JPN, USA > IND, ITA SSA T2.5 > S1, T1.5 destruction A > MENA, SSA S2 > S1 E > SSA Vulnerability to CHN > BRA NA > E, LA, MENA, S3 > All other - - - - geomagnetic USA > BRA, ITA SSA stages storms A > MENA, LA, SSASection 4 E > LA Critical fragile CHE > ITA, JPN, RUS A, E, NA > SSA S3 > S1, T1.5, S2 - 3.13 < 3.27 3.26 > 3.09 - states CHN > ITA T2.5 > S1, T1.5 S2 > S1 Diffusion of CHN, USA > ITA, A, NA > LA, SSA S3 > S1, T1.5 - - 2.88 > 2.72 - weapons of mass JPN E > SSA S2 > S1 destruction Entrenched CHN, USA > BRA, NA > E, LA, SSA, S3 > All other - 2.95 < 3.13 3.11 > 2.88 - organized crime ITA, JPN, RUS A, E, MENA > LA, stages CHE, DEU, GBR > SSA ITA, RUS IND, JPN > ITASection 5 Failure of CHE, CHN > ITA, NA > LA, SSA S3 > S1, T1.5, S2 - 3.01 < 3.13 - - diplomatic JPN, RUS T2.5 > S1 conflict resolution BRA, USA > ITA, JPN DEU, GBR > JPN Global CHN > IND, ITA, JPN, A, NA > SSA S3 > S1, T1.5 - - - - governance RUS S2 > S1 failure CHE > ITA, JPN, RUS USA > ITA Militarization of USA > BRA, DEU, NA > All other S3 > S1, T1.5, T2.5 - - - - space GBR, IND, ITA, JPN regionsSection 6 CHN > GBR, ITA, A > LA JPN Pervasive USA > BRA, CHN, NA > A, E, LA, SSA S3 > All other - 2.72 < 2.97 - - entrenched IND, ITA, RUS A, E, MENA > LA, stages corruption CHE, JPN > BRA, SSA S2, T2.5 > S1 IND, ITA, RUS CHN, DEU, GBR > IND, ITA, RUS Terrorism CHN > IND, ITA, JPN, E, NA, MENA > LA, S3 > S1, T1.5, T2.5 - 3.01 < 3.16 - - RUS SSA S2, T2.5 > S1 USA > IND, JPN, A > LA RUS Unilateral BRA, CHN, USA > NA > A, E, LA, SSA T2.5, S3 > S1 - 2.89 < 3.12 - - resource DEU, GBR, IND, ITA, nationalization JPN CHE > ITA, JPN Widespread illicit CHN, USA > ITA, NA > E, LA, SSA S3 > All other - 2.98 < 3.13 - - trade RUS A > LA, SSA stages E, MENA > SSA S2 > S1 Backlash against DEU > GBR, IND, - S3 > S1, T1.5, S2 - - 3.17 > 3.04 globalization ITA, JPN T2.5 > S1 USA > JPN 72 Global Risks 2013
  • 73. Section 1Food shortage BRA > GBR, IND, NA > A, MENA, LA, T2.5, S3 > S1, T1.5, - 3.23 < 3.38 - 3.21 < 3.39crises JPN SSA S2 CHE, CHN, DEU, E > A, SSA S2 > S1, T1.5 USA > IND, JPN A > SSAIneffective illicit CHE, CHN > BRA, A > LA, NA, SSA S3 > S1, T1.5, T2.5 - - - -drug policies GBR, ITA, RUS, USA E, MENA > LA JPN > BRA, ITA, Section 2 RUS, USA DEU > BRA, ITAMismanagement IND > GBR, ITA, RUS MENA > NA, E - - 2.81 < 2.95 - -of population CHE > ITA, RUSageingRising rates of JPN > BRA, GBR, A > LA, SSA S3 > All other - - 2.98 > 2.82 2.87 < 2.99chronic disease IND, RUS, USA E, NA, MENA > stages SSA S2 > S1Rising religious BRA, CHN > IND, LA > E, MENA, NA, S2 > S1, T1.5, S3 - 3.06 < 3.19 3.19 > 2.99 -fanaticism RUS, USA SSA S3 > S1, T1.5 CHE > IND, USA T2.5 > S1 JPN > IND Section 3Unmanaged BRA > IND, ITA, RUS NA > E T2.5, S3 > S1, S2 - 2.91 < 3.13 3.08 > 2.89 2.94 < 3.10migration USA > IND, ITA All other regions > T1.5, S2 > S1 CHN > IND SSAUnsustainable CHE, CHN, USA > NA > A, SSA T2.5, S3 > S1, T1.5 - 2.89 < 3.21 3.10 > 2.95 2.99 < 3.12population IND E > SSA S2 > S1growthVulnerability to CHE, CHN, USA > A, E, NA > LA, SSA S3 > All other - - - -pandemics BRA, IND, RUS stages DEU, JPN > IND, RUS S2, T2.5 > S1Water supply BRA > CHN, GBR, E > A, MENA, SSA T2.5, S3 > S1, T1.5, G, A, B > N 3.1 < 3.25 3.27 > 2.97 3.03 < 3.31crises IND, ITA, USA NA > A, SSA S2 Section 4 CHE, DEU, JPN > LA > SSA S2 > S1 CHN, IND, ITA CHN, GBR, RUS, USA > INDCritical systems USA > BRA, GBR, NA > A, E, LA, SSA S3 > All other - - - 3.14 > 2.87failure IND, ITA, RUS A > LA, SSA stages CHE > IND, ITA, RUS E, MENA > SSA S2 > S1Cyber attacks USA > GBR, IND, NA > A, E, LA, SSA S3 > All other - - - 3.11 > 2.93 ITA, JPN, RUS A, E, MENA > SSA stages CHN > IND S2, T2.5 > S1Failure of USA > RUS NA > LA, SSA, S3 > All other - - - - Section 5intellectual MENA stagesproperty regimeMassive digital USA > IND, ITA, RUS NA > A, E, LA, SSA S3 > All other B > IO 2.99 < 3.11 - 3.18 > 3.01misinformation CHE, CHN > IND, ITA A, E, MENA > SSA stages DEU, GBR, JPN > S2, T2.5 > S1 INDMassive incident USA > BRA, GBR, NA > A, E, LA, SSA S3 > All other - 2.88 < 3.04 - 3.13 > 2.91of data fraud/theft IND, ITA, RUS A > LA, SSA stages E, MENA > SSAMineral resource USA > DEU, GBR, NA > All other T2.5, S3 > S1, T1.5 - 2.85 < 3.01 - -supply IND, ITA, JPN regions S2 > S1vulnerability CHN, RUS > GBR, Section 6 IND, ITA, JPNProliferation of USA > BRA, GBR, NA > All other S3 > S1, S2, T2.5 - - - 2.84 > 2.67orbital debris IND, ITA, JPN regions CHN > BRA A > LAUnforeseen JPN > GBR, IND NA > LA, SSA S3 > All other - - - -consequences of CHN, USA > GBR stagesclimate changemitigationUnforeseen USA > BRA, GBR, NA > E, LA, MENA, S3 > All other - - 2.77 > 2.62 2.92 > 2.65consequences of IND SSA stagesnanotechnology CHN, JPN > BRA A > LA, MENA, SSA Europe > LA, SSAUnforeseen USA > BRA, GBR, NA > E, LA, SSA, S3 > All other - 2.64 < 2.82 - 2.85 > 2.70consequences of ITA, RUS MENA stagesnew life science A, E > LA, SSAtechnologies Global Risks 2013 73
  • 74. Section 1 AcknowledgementsSection 2 Global Risks 2013 synthesises the insights, Global Risks 2013, Eighth Edition PartnersSection 3 ideas and contributions of many individuals Marsh & McLennan Companies through workshops, interviews, group calls National University of Singapore and research. The project team sincerely Oxford Martin School, University of Oxford thanks everyone who took part in the Swiss Reinsurance Company Wharton Center for Risk Management, University of challenge to think hard about global risks. Pennsylvania Without their dedication, guidance and Zurich Insurance GroupSection 4 support, we would not have been able to With special thanks to Advisory Group for the Global Risks develop this report. 2013 Eighth Edition (in alphabetical order by last name): David Cole, Swiss Reinsurance Company John P. Drzik, Oliver Wyman Group (MMCo) Ian Goldin, Oxford Martin School Howard Kunreuther, The Wharton School, University of PennsylvaniaSection 5 Axel Lehmann, Zurich Insurance Group Tan Chorh Chuan, National University of Singapore And the following representatives of the global risk partners for their contribution to the Global Risks report content development and dissemination (in alphabetical order by last name): Josephine Chennell, Swiss Reinsurance Company Natalie Day, Oxford Martin SchoolSection 6 Rainer Egloff, Swiss Reinsurance Company Ho Teck Hua, National University of Singapore Erwann Michel-Kerjan, The Wharton School, University of Pennsylvania Lucy Nottingham, Marsh & McLennan Companies Gregory Renand, Zurich Insurance Group Reto Schneider, Swiss Reinsurance Company Andrea Stuermer, Zurich Insurance Group Tay Lee Teng, National University of Singapore Mike Useem, The Wharton School, University of Pennsylvania Steve Wilson, Zurich Insurance Group Alex Wittenberg, Marsh & McLennan Companies 74 Global Risks 2013
  • 75. Section 1The project team would also like to thank all the business, Tikki Pang, National University of Singaporepublic sector, academic and civil society leaders who Robert Parisi, Marsh Inc (Marsh & McLennan Companies)participated in our interviews, workshops, and risk casesdevelopment (in alphabetical order by last name with their Felix Reed-Tsochas, Oxford Martin Schoolaffiliation at the time of participation): Daniel Ryan, Swiss Reinsurance CompanyDapo Akande, Oxford Martin School Anders Sandberg, Oxford Martin School Section 2Mark Ames, Oliver Wyman (Marsh & McLennan Companies) Julian Savulescu, Oxford Martin SchoolDaniel Andris, Swiss Reinsurance Company Oliver Schelske, Swiss Reinsurance CompanyDan Awrey, University of Oxford Andreas Schraft, Swiss Reinsurance CompanyValerio Bacak, The Wharton School, University of Pennsylvania Martin Schürz, Swiss Reinsurance CompanyLuis Ballesteros, The Wharton School, University of Lutfey Siddiqi, National University of SingaporePennsylvania Janet Smart, University of OxfordJohn Boochever, Oliver Wyman (Marsh & McLennan Richard Smith-Bingham, Oliver Wyman (Marsh & McLennanCompanies) Companies) Section 3Sandra Burmeier, Swiss Reinsurance Company Keoyong Song, The Wharton School, University of PennsylvaniaPhilippe Brahin, Swiss Reinsurance Company Yumiko Takada, Marsh Japan Inc (Marsh & McLennan Companies)Jerry Cacciotti, Oliver Wyman (Marsh & McLennan Companies) Rolf Tanner, Swiss Reinsurance CompanyIordanis Chatziprodromou, Swiss Reinsurance Company Dodo J. Thampapillai, National University of SingaporeOliver Chen, National University of Singapore Cecilia Tortajada, Third World Centre for Water Management,Carl Frey, Oxford Martin School MexicoTim Garton Ash, University of Oxford Ginger Turner, The Wharton School, University of Pennsylvania Sonia Trigueros, Oxford Martin School Section 4Ed George, The Wharton School, University of PennsylvaniaCharles Godfray, Oxford Martin School Richard Waterman, The Wharton School, University of PennsylvaniaMark Goh, National University of Singapore Michael Weissel, Oliver Wyman (Marsh & McLennanBeat Habegger, Swiss Reinsurance Company Companies)Raja Hafiz Affandi, The Wharton School, University of Daniel Wesemann, Swiss Reinsurance CompanyPennsylvania Martin Weymann, Swiss Reinsurance CompanyPeter Hausmann, Swiss Reinsurance Company Barrie Wilkinson, Oliver Wyman (Marsh & McLennanAnwarul Hasan, Swiss Reinsurance Company Companies) Section 5Carol Heller, The Wharton School, University of Pennsylvania Ngaire Woods, Blavatnik School of GovernmentClaus Herbolzheimer, Oliver Wyman (Marsh & McLennan Arran Yentob, Oliver Wyman (Marsh & McLennan Companies)Companies) Bernard Yeung, National University of SingaporeSatoru Hiraga, Marsh Japan (Marsh & McLennan Companies) Nick Wildgoose, Zurich Insurance GroupYoshiki Hiruma, Development Bank of JapanKurt Karl, Swiss Reinsurance Company Testing Economic and Environmental ResilienceJussi Keppo, National University of Singapore David Bresch, Swiss Reinsurance CompanyMike King, NERA, Oliver Wyman (Marsh & McLennan Davis Cherry, Global Adaptation Institute Section 6Companies) Megan Clark, Commonwealth Scientific and Industrial ResearchHeng Yee Kuang, National University of Singapore OrganisationTim Kruger, Oxford Martin School Juan José Daboub, Global Adaptation InstituteSusan Lea, Oxford Martin School Charlotta Groth, Zurich Insurance GroupGeorge Leeson, Oxford Martin School Jim W Hall, Environmental Change Institute, University of OxfordElizabeth Leicht, Oxford Martin School Abyd Karmali, Bank of America Merrill LynchAlexander Leveringhaus, Oxford Martin School Signe Krogstrup, Swiss National BankMichael Lierow, Oliver Wyman (Marsh & McLennan Companies) Marc Levy, CIESIN, Columbia UniversityJohn Merkovsky, Marsh Inc (Marsh & McLennan Companies) Manuel Lewin, Zurich Insurance GroupAnn Miller, The Wharton School, University of Pennsylvania Anders Lyngaa Kristoffersen, NovozymesLea Müller, Swiss Reinsurance Company Murray Birt, Deutsche Bank GroupMary Ng Mah Lee, National University of Singapore Guy Miller, Zurich Insurance GroupKalypso Nicolaidis, University of Oxford Chandran Nair, Global Institute for TomorrowToby Ord, Oxford Martin School Ian Noble, Global Adaptation Institute Global Risks 2013 75
  • 76. Section 1 Konrad Otto-Zimmerman, ICLEI Special Report: Building National Resilience to Global Tim Palmer, Oxford Martin School Risks Lindene Patton, Zurich Insurance Group Ian Bremmer, Eurasia Group Johan Rockström, Stockholm Resilience Centre Dennis L. Chesley, PwC Juan Carlos Castilla Rubio, Planetary Skin Institute Mary Cline, Eurasia GroupSection 2 John Scott, Zurich Insurance Group Anne-Sophie Crépin, Stockholm Resilience Centre Jorge E. Viñuales, The Graduate Institute, Geneva Elizabeth Eide, The National Academies, Division of Earth and Life Sciences Digital Wildfires in a Hyperconnected World Victor Galaz, Stockholm Resilience Centre Jolyon Barker, Deloitte Touche Tomatsu Ltd Jac C. Heckelman, Wake Forest University Adam Bly, Seed Emily Hoch, Eurasia Group Sadie Creese, Oxford Martin School Anders Hoffman, Danish Enterprise and Construction Authority Scott David, University of Washington Law, Technology and Arts Randolph Kent, Humanitarian Futures ProgrammeSection 3 Group Szerb László, University of Pecs Giorgos Dimitriou, European Network and Information Security Agency (ENISA) Emma Lindqvist, Eurasia Group Daniel Eherer, Zurich Insurance Group Alexsandra Lloyd, Eurasia Group Nik Gowing, BBC World News Kirstjen Nielsen, Sunesis Consulting, LLC Witold Henisz, The Wharton School, University of Pennsylvania Satoru Nishikawa, Japan Water Agency Louis Marinos, European Network and Information Security Sara Pantuliano, Overseas Development Institute Agency (ENISA) Rodrigo Pérez Mackenna, Ministerio de Vivienda y UrbanismoSection 4 Matthew Prince, CloudFlare Courtney Rickert McCaffrey, Eurasia Group Andreas Sfakianakis, European Network and Information Christopher Michaelson, PwC Security Agency (ENISA) Dionisis Philippas, JRC Ray Stanton, British Telecom Michaela Saisana, European Commission Jamie Tomasello, CloudFlare Andrea Saltelli, OECD The Dangers of Hubris on Human Health Ross D. Schaap, Eurasia Group Don Tapscott, Moxie Insights David B. Agus, University of Southern CaliforniaSection 5 Lindsey Baden, The New England Journal of Medicine X Factors Richard Bergström, European Federation of Pharmaceutical Tim Appenzeller, Nature Industries and Associations Philip Campbell, Nature Zulfiqar A. Bhutta, The Aga Khan University We also would like to thank all the people who participated Otto Cars, ReAct - Action on Antibiotic Resistance in the Global Risks Survey 2012. Jean Carlet, World Alliance against Antibiotic Resistance (WAAR) Jeffrey M. Drazen, The New England Journal of Medicine John Frater, Oxford Martin SchoolSection 6 Chris Gillies, Zurich Insurance Group Kari Grave, European Medicines Agency Martha Gyansa-Lutterodt, Pharmaceutical Services and Chief Pharmacist of Ghana Anna Hedin, ReAct - Action on Antibiotic Resistance Uppsala University Dominique L. Monnet, European Centre for Disease Prevention and Control Carmem Pessoa, World Health Organization Laura J.V. Piddock, University of Birmingham and Antibiotic Action Paul Rogers, World Health Organization Nabil Safrany, European Centre for Disease Prevention and Control Johan Struwe, World Health Organization 76 Global Risks 2013
  • 77. Section 1In addition, the project team expresses its gratitude to the Viraj MehtaGlobal Agenda Council community managers, the Business Liana MelchenkoEngagement and Development team, and the followingcolleagues from the World Economic Forum for their advice Matthew Millerand support throughout the Global Risks report Katherine Milligandevelopment: John Moavenzadeh Section 2Amrote Abdella Martin NägeleDavid Aikman NavdeepGuillaume Amigues Lyuba NazarukMarisol Argueta Derek O’HalloranAnastassia Aubakirova Sushant Palakurthi RaoAdeyemi Babington-Ashaye Gary PhillipsBeñat Bilbao Pengcheng QuCarl Björkman Olivier Raynaud Section 3Jennifer Blanke Lucien RiebenRoberto Bocca Pedro Rodrigues De AlmeidaCiara Browne Olivier SchwabGiancarlo Bruno Kate SeilerSophie Bussmann Bernardo SilvaRoberto Crotti Paul SmykePiers Cumberlege Masao Takahashi Section 4Nicholas Davis Michael TostMargareta Drzeniek Terri ToyotaIsabel de Sola Akira TsuchiyaSean Doherty Tran Tu-TrangMichael Drexler Silvia von GuntenMiroslav Dusek Nina VugmanJohn Dutton Regula Waltenspuel Section 5Rim El Habibi Dominic WaughrayManal El Meligi Bruce WeineltCristiana Falcone Tiffany WestBrindusa Fidanza Alex WongThierry Geiger Founder and Executive ChairmanMartina Gmür Klaus SchwabAriane HaeniAndrew Hagan Managing Directors Section 6Hala Hanna Børge BrendeWilliam Hoffman Robert GreenhillAntonio Human Lee HowellAlexandra Jequier Adrian MonckJulianne Jammers Sarita NayyarJeremy Jurgens Gilbert ProbstElsie Kanza Jean-Pierre RossoThomas Kerr Kevin SteinbergHanseul Kim Alois ZwinggiPawel KonzalRodolfo Lara TorresHelena LeurentAlan Marcus Global Risks 2013 77
  • 78. Section 1 Project TeamSection 2 The Global Risks 2013 report, EighthSection 3 Edition, team includes the following World Economic Forum staff members: Editor in Chief Production Team Lee Howell, Managing Director, Member of the Managing Board Michael Hanley, Editorial Director, Communications Kamal Kimaoui, Director, Head of Production and Design Research Team, Global Risks Report Scott David, Associate Director, Head of Information InteractionSection 4 Adrian Shawcross, Freelance Graphic Designer Chiemi Hayashi, Director, Head of Risk Response Network and Risk Research David Bustamante, Senior Content Producer, Publication and Design Catherine Zwahlen, Senior Knowledge Manager Floris Landi, Graphic Designer, Publication and Design David Gleicher, Manager, Qualitative Research David Helmsley, Junior Graphic Designer, Publication and Florian Ramseger, Manager, Quantitative Research Design Amey Soo, Research Associate, Quantitative Research Mary Bridges, Editor Katarina Hruba, Project Associate, Qualitative Research Itonics GmbH, Web Design, Online Data ExplorerSection 5 Karen Campbell, Senior Economist Yoren Geromin, Graphic Design Andrew Wright, Freelance Writer Risk Response Network Team Linda Freiner, Associate Director, Head of Community Engagement Samantha Tonkin, Associate Director, Head of CommunicationSection 6 Navitri Putri Guillaume, Government Engagement Manager Charles Lane, Supply Chain and Transport Risks Project Manager Alexis Munier, Editorial Manager Ceri Parker, Writer Edward Simmons, Resilience Practices Exchange Project Manager David Connolly, Business Engagement, Senior Community Associate Gregory Coudrier, Digital Associate Rim El Habibi, Media Associate Stéphanie Badawi, Team Coordinator 78 Global Risks 2013
  • 79. The World Economic Forumis an independent internationalorganization committed toimproving the state of the worldby engaging business, political,academic and other leaders ofsociety to shape global, regionaland industry agendas.Incorporated as a not-for-profitfoundation in 1971 andheadquartered in Geneva,Switzerland, the Forum istied to no political, partisanor national interests.World Economic Forum91-93 route de la CapiteCH-1223 Cologny/GenevaSwitzerlandTel +41 (0) 22 869 1212Fax +41 (0) 22 786 2744contact@weforum.orgwww.weforum.org